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Ross Newhan / ON BASEBALL

Past Decisions a Tax on Dodgers

August 24, 2003|Ross Newhan

At a time when budget and taxes are the major issues in California's election free-for-all, similar issues remain dominant themes of a Dodger season in which seldom has so much pitching compensated for so little hitting.

Resolutely clinging to the wild-card pack approaching September, would it now be easier had they not decided to turn the new luxury-tax threshold into a self-imposed payroll cap?

Were they being penny-wise and pound-foolish?

What would a modest tax penalty and a few million dollars more have hurt in the context of what they had already invested during News Corp.'s ownership, a period during which no other team has spent more without reaching the playoffs?

Wouldn't any cost-benefit analysis have had to weigh the tax against the rewards of possibly attaining that playoff goal with a stronger offense?

Well, it is easy to spend someone else's money, but the Dodgers remain burdened by the financial sins of the past.

They were reluctant, President Bob Graziano said in a first extensive explanation of last winter's budget decision, to repeat those spending mistakes and incur a tax liability that would extend their roster and financial limitations beyond 2003 and could not guarantee they would be more competitive.

"It's a progressive tax," Graziano said. "It was not a one-year decision."

In the first year of the new labor agreement, only the New York Yankees, with their vast revenue, have maintained a taxable payroll.

But none of the 29 other clubs, players' union lawyer Michael Weiner said, "has made the kind of declarative statement the Dodgers have" by treating the $117-million tax threshold as a cap.

"[General Manager] Dan Evans has been clear about that from the outset, both in his conversations with player agents and the press," Weiner said. "To our knowledge, no club treated the tax this way even in the prior agreement, when the rate was double what it is now."

The tax of 1997, '98 and '99, however, was primarily an experiment for which the clubs had little time to prepare, and the thresholds were based on an adjustable scale so complicated that most general managers would have needed help from MIT to unravel it.

The Dodgers, perhaps, have been more candid about their stance in regard to the new tax, but they are certainly not alone.

The New York Mets and Texas Rangers, the two other teams closest to the threshold at the end of last season, have also made sure to stay below it.

"Whether clubs are talking about it or not, it seems clear that everybody except [the Yankees] has made a conscious effort to stay under," Graziano said. "That was the purpose, to try and minimize the competitive disparity."

With the midseason additions of Jeromy Burnitz and Robin Ventura, sources put the Dodger payroll based on the tax formula at between $112 million and $115 million, suggesting that Evans had, and still has, more wiggle room than thought, enhancing his search for a left-handed-hitting role player before next Sunday's deadline for acquiring a player who would be eligible for the postseason.

As for the new provisions, any club surpassing the $117-million threshold must pay a 17.5% tax on the amount of payroll over the threshold.

The Yankees, over by at least $53 million and maybe more in the final accounting, will owe more than $9 million and be subject to a higher rate next year as a previous offender.

The 2004 threshold goes to $120.5 million with a tax rate of 22.5%. The Yankees, however, will be taxed at 30%. Of course, they are headed to the playoffs in the meantime.

"It doesn't matter if it's $118 million or $119 million, by going over [the threshold], you're triggering the higher rate next year, and significantly limiting the possibility that you might choose to go over it then, as well as limiting your flexibility in general," Graziano said. "We wanted to avoid doing that again. We didn't want to make the spending mistakes we have in the past and negatively impact the future again.

"Had we clearly thought that by going over the threshold, it would have significantly enhanced our chances to reach the playoffs, we might have made that decision. But we went into the season convinced we would be a pennant-contending team with our pitching and defense and that we didn't have to trigger the tax to become a contender.

"We knew our offense might not be the strongest in the league, but we didn't know it would perform as poorly as it did in the first half. I don't think anyone would have imagined we'd be last [in so many categories]. We'd be in a much better position now if it hadn't performed so poorly."

The Dodgers, of course, will have to live with their decision, and Graziano contradicted the conventional wisdom, insisting that News Corp. was not involved in it and had not ordered it.

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