Dodgers deferred salaries spark MLB salary cap questions

As Major League Baseball’s spring training kicks into gear, the Los Angeles Dodgers are wrapping up a nearly perfect offseason.

After the Dodgers captured the World Series in October, the team notched more wins in the winter. The club retained key players, brought in coveted free agents and deferred over $130 million in new contracts — sending many baseball fans into an uproar that has reignited backlash to the sport’s financial model.

Criticism of the Dodgers deferring money, or delaying paying players much of their salary until after their contract with the team ends, first began in 2023. The team signed Shohei Ohtani to a then-record 10-year, $700 million deal, but deferred $680 million of that total. The team’s offseason this year amplified that criticism into outright fury, provoking allegations that the Dodgers manipulated MLB’s salary system to build a superteam.

While contract deferrals have become more common across MLB, the Dodgers have relied on them more than any other team. Of roughly $1.5 billion in known deferred money on active MLB contracts, the Dodgers account for about $1.04 billion — or two-thirds, according to data from sports contract website Spotrac compiled by CNBC.

Contract deferrals can provide advantages to both franchises and players, sports business experts told CNBC. But the practice is just one piece of larger criticism of the fairness and sustainability of MLB’s financial structure. Critics aren’t just angry at the Dodgers’ ability to defer money; they’re frustrated by what they see as a league with no salary cap creating unfavorable conditions for teams unable or unwilling to spend as much as the Dodgers do year after year.

“The Dodgers are definitely way, way, way out in their own space when it comes to these deferral deals,” said N. Jeremi Duru, law professor and director of the Sport & Society Initiative at American University.

Teams kick salary down the road for a simple reason: They save money now, controlling the cost of a star-studded roster. They may decide present success is worth future liabilities.

Unlike many other professional sports leagues, MLB doesn’t have a salary cap limiting how much teams can pay players. It does, however, enforce a “competitive balance tax,” which levies a fee on teams that exceed a certain payroll threshold. The tax payment depends on the amount by which the payroll exceeds the threshold.

For luxury tax purposes, a team’s payroll is calculated by summing the average annual values of each contract, according to MLB’s current collective bargaining agreement. For contracts with deferred salary, that number typically turns out smaller than if the pay weren’t deferred, so teams can…