Ohtani deferred MLB money delays most of California's potential tax collection
Tuesday, December 12, 2023
U.S. sports fans this time of year are focused on football. We're in the midst of the NFL season (how 'bout them Cowboys thumping the Eagles on Sunday night?!) and the NCAA bowl season is on the horizon.
But a baseball player has many of us talking.
Shohei Ohtani, the phenomenal two-way player touted as the modern-day Babe Ruth, set yet another record, this time off the field. The Japanese pitcher-slugger signed a $10-year, $700 million deal with the Los Angeles Dodgers that shatters all prior major league records.
It's the biggest deal not just for an MLB player, but in of U.S. team sports.
But here's the really interesting part. The bulk of Ohtani's money, $680 million, will be deferred. He's reportedly getting "just" $2 million a year for 10 years, with the remaining millions to be paid out starting in in 2034, after his 10-year contract with the L.A. team expires, and running to 2043.
Eric Fisher has the details on the arrangement in his Front Office Sports story. It's a good read on how the deal is set up to free up ostensible Ohtani money so the Dodgers can add more players to help the superstar finally participate in, and he and the Dodgers hope, finally win some playoff games.
For the first time in his career, Shohei Ohtani is playing for a World Series-contending team, says @AEricFisher.
— Front Office Sports (@FOS) December 10, 2023
The superstar is ready to win — and his $700M contract's "unprecedented" deferrals ensure the Dodgers can build around Ohtani to win a title.
Potential lower Ohtani personal taxes: And of course, there's a tax angle.
I'm not just talking the MLB's so-called competitive balance tax that affects the teams' finances.
I'm talking Ohtani's personal taxes. Since all of his home games, along with some away match-ups, will be in California, Ohtani will end up handing over a portion of his earnings to the Golden State treasury.
And it will be a substantial portion. California's top tax rate for millionaire's is 14.4 percent.
Of course, as Fisher notes, if Ohtani decides to retire after a decade in Dodger blue and stay in the United States, a move to a lower or no tax state could make that deferred $680 million last even longer.
You also might find these items of interest:
- Tax implications far from nil for college athletes' NIL money
- Summer means sports and jock taxes, even for non-athletes
- World Series games are a financial boon for Houston, Philly, and their tax collectors
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