Shohei Ohtani is an LA Dodger: 10 years/$700 million

[barclay]

Does Yomiuri Giants count? Because I’m a Giants fan then! My wife is from Tokyo and it feels like they’ve gone through some tough times of late.

Of course it does! I used to wear a Yomiuri Giants cap when we moved to CA and, at that time, no one had any idea what it was. I loved It though. As for the SF Giants, you'd have to look at videos in order to get a nominal sense of the enmity that has accrued between the Dodgers and Giants, best symbolized by Juan Marechal hitting Johnny Roseboro over the head with his bat. Yikes. When Mookie, who I loved, went to the Dodgers it was a dagger to the heart. Far worse than Damon or Clemens (who I didn't like as a person).

 

[SemperFidelisSox]

In 2024, Ken Griffey Jr will be in the last year of deferred payments and make a salary of $3.6 million.

Ohtani’s salary will be $2 million.

 

[Pablo's TB Lover]

Edit: nevermind

 

[mikcou]

And the feds if he’s living back in Japan when he’s done playing. Can they really go after a citizen of a foreign country for evading US taxes?

And yes I’m completely ignorant on how tax collection works. I’m just wondering about the logistics of it.

Any taxing authority would look to the employer in a scenario where the employee was no longer in the jurisdiction. To the extent that the payment was sourced to their jurisdiction, the employer would have had an obligation to withhold tax (e.g., when the Dodgers make the payment it is still employee compensation that will be subject to withholding). That said, tax treaties generally have cooperation agreements in them to allow for each country to collect tax liabilities from the other's citizens. With a person as significant as Ohtani, if the IRS wasnt satisfied that the withholding was sufficient to cover Ohtani's liability they could also go that route.

This crossed my mind too, I don't know how this works.

It was "earned" for playing baseball in LA 2024-2033 but not actually paid until later.

CA state tax is rough so if he avoids that, he saves a lot of $.

The specifics of employee benefits goes a bit beyond me, but generally deferred compensation is sourced to the state where the services to which the payment relates. Simple example, I work in MA and have a 50k deferred to 2024. If I move to NH in 2024, the payment would still be subject to MA tax. That said, a common tactic/structure in corporate non qualified deferred comp plans is to have an option to structure payouts over at least 10 years, which the federal government (as well as expected life) has provided that state governments can no longer tax deferred comp on a non-resident basis.

I dont know enough of the specifics of these rules to say whether that exception applies here... but there's at least some possibility that hes getting a nice state tax benefit. Perhaps someone who works more closely on deferred comp can confirm.

 

[mikcou]

This is such a blatent luxury tax bypass move. But the players won't be eager to close the loophole. Hell, they would have no issues with the owners deferring half their payroll and for example want to pay $400 million in real dollars but $200 mil now and put $200 mil in escrow, to avoid luxury tax payments.

The small market teams are certainly opposed to this, but even a seemingly fiscally responsible large market team like the Red Sox can't be pleased. The Dodgers payroll will LOOK close to the Sox CBT calculated payroll, but with a shit ton more talent.

I fail to see why they would care? This isnt creating more value for the player that isnt subject to the luxury tax. It's just correctly valuing payments that are being made significantly into the future. Said another way, Ohtani doesnt get 10/700 without the deferral so whether he got 10/470 or 10/700 with deferrrals, everyone comes out in the same spot.

 

[VORP Speed]

I’m not sure what it says about me, but diving into the tax minimization strategies of Dodger contract structuring is making for great entertainment! Someone posted it earlier, but it looks like cash comp that is deferred for 10 yrs kicks it into being taxed in the state of residence at the time the deferred comp is received. So this would save Shohei about $90m in taxes, assuming he relocated post-retirement. It looks like they also did this with Mookie, btw, deferring $115m of his deal. Interestingly, Mookie’s deal also included $75m of signing bonuses, which helps Mookie because he is a TN resident (no state income tax) and signing bonuses are taxed in the home state and not state where games are played. Shohei is a CA resident, so this wouldn’t help him and unsurprisingly no such signing bonuses are included in his contract. All of which leads me to believe that for all the talk of keeping the Dodgers competitive, this is just a savvy tax minimization strategy that the Dodgers have structured to basically have the state of CA subsidize the contract.
Given that Shohei is not a US citizen, it really gets interesting if there is some way for the Dodgers to make the deferred payments to him in Monaco or whatever his tax haven of choice is that would be classified as non-US income. Then you’re talking $275m plus the $90m saved from CA.

 

[PedroKsBambino]

Right, but I think our options are here are be amazed that he took a contract worth only this much, or think that he is benefitting in some other way (taxes, as discussed).

To me I just think at this economic stratosphere, the financial advisors and agents are too savvy and bottom-line oriented to just surrender tens or hundreds of millions of value with no ulterior profit motive.

which is why I doubt there’s a materially better offer that was out there. It may just be more complicated than day one projected AAV

 

[Petagine in a Bottle]

From the Sports Business Journal


“Ohtani deal shines a spotlight on SportsNet LA
One MLB team in Southern California -- the Padres -- lost its RSN contract last year that paid an average of $65 million per year. Last week, the team traded star player Juan Soto as part of a move to trim salaries.

Another MLB team in SoCal -- the Dodgers -- has an ironclad RSN contract that pays an average of $334 million per year through 2038. Last week, the team signed star two-way player Shohei Ohtani to a record-setting 10-year, $700 million deal. There’s no need to trim salaries in Chavez Ravine. In fact, the Dodgers pledge to add more all-stars.

These two situations are interconnected and demonstrate -- at least in the short term -- that MLB’s divide between the haves and the have-nots is getting wider thanks to even greater discrepancies in local media money.

The Dodgers local TV deal is considered by many to be the most team-friendly pact in baseball. It is not affected by the cord-cutting headwinds that are roiling the rest of the media business. The deal was set up so that Charter will pay the Dodgers’ rights fee in full regardless of how many subscribers it loses with SportsNet LA. Let’s say cord-cutting leaves the RSN with just two paying subscribers. Charter still will owe $334 million annually.

Here’s how it works. Bally Sports San Diego was losing money on its Padres deal and wanted to get out. Like most RSNs across the country, the San Diego one was run through an LLC. That makes it easier for media companies to get out from under money-losing deals. It’s relatively easy for those LLCs to go into bankruptcy, or at least threaten it.

Bally Sports San Diego’s LLC did not go into bankruptcy. But the use of an LLC operationally made it easier for the media company to get out of the contract.

The Dodgers’ RSN has no LLC attached to it. That means that Charter -- the $55 billion parent of the RSN -- would have to go bankrupt just to get out of that RSN deal. That’s not going to happen.

Adding complexity to the RSN deal, the Dodgers own SportsNet LA. Charter has a services agreement with the RSN where it gets all the ad revenue and affiliate revenue. But it also means that Charter is on the hook for the $334-million-per-year rights fee that it must pay the team”.

 

[Harry Hooper]

Huh how about that - thanks for this. Had no idea they used different rates. Maybe there's reasonable economic explanations for both but on the surface it seems like a bit of a ball drop by the MLBPA.

The higher the discount rate, the more the salary value shrinks with the deferred payments. MLBPA may have welcomed the higher rate since it enables teams to spend more money on players and still stay under the CBT or minimize its bite.

 

[Tokyo Sox]

The higher the discount rate, the more the salary value shrinks with the deferred payments. MLBPA may have welcomed the higher rate since it enables teams to spend more money on players and still stay under the CBT or minimize its bite.

Not sure what I'm missing here -- I get how PV'ing works, but the higher rate in this case is the 10% rate used on the Qualifying Offer calculation, not for the CBT AAV calc. The only logic I can see for the MLBPA to want a higher rate for that is to make it easier to turn down a QO, with the assumption that in most cases players will make more in FA.

 

[Harry Hooper]

Not sure what I'm missing here -- I get how PV'ing works, but the higher rate in this case is the 10% rate used on the Qualifying Offer calculation, not for the CBT AAV calc. The only logic I can see for the MLBPA to want a higher rate for that is to make it easier to turn down a QO, with the assumption that in most cases players will make more in FA.

Ah, I completely misread that, sorry.

Yes, the higher rate would seem to make it a bit easier for teams to extend qualifying offers, but also easier for players to reject them.

 

[radsoxfan]

This is such a blatent luxury tax bypass move.

Absolutely not true.

There is no luxury tax bypass.

Ohtani signed a 10/460M contract and the Dodgers will pay 46M per season in tax, as they should.

The fact that it can be structured at an equivalent value as 700M over 20 years to sound more impressive is irrelevant. They could probably structure it as 1 Billion over 30 or 40 years if they wanted. Who cares.

It just comes down to what the contract is worth after it's normalized to the length of the deal.

 

[nighthob]

View: https://twitter.com/andrewbrandt/status/1734351567094968356?s=46&t=IVL2VrlFgLlpc3mjGGto8Q

A state won’t be enough. Home in Japan? That might work, but I expect that California will still try to enforce state taxes even if he’s back in Tokyo.

 

[Apisith]

I'm not the type to say the market is wrong, but Ohtani signing this type of contract and using 4-5% as the discount rate is a good bet IMO. If the global economy slows like expected and rates are cut, the present value of the deal ends up closer to $600m when all's said and done. Not going to turn this into a finance thread but long-term yields has been trending down for basically 200 years, Ohtani's making a good bet IMO.

 

[Sille Skrub]

What's the Olive Garden joke?

When you’re here, you’re family.

 

[Pablo's TB Lover]

I fail to see why they would care? This isnt creating more value for the player that isnt subject to the luxury tax. It's just correctly valuing payments that are being made significantly into the future. Said another way, Ohtani doesnt get 10/700 without the deferral so whether he got 10/470 or 10/700 with deferrrals, everyone comes out in the same spot.

Absolutely not true.

There is no luxury tax bypass.

Ohtani signed a 10/460M contract and the Dodgers will pay 46M per season in tax, as they should.

The fact that it can be structured at an equivalent value as 700M over 20 years to sound more impressive is irrelevant. They could probably structure it as 1 Billion over 30 or 40 years if they wanted. Who cares.

It just comes down to what the contract is worth after it's normalized to the length of the deal.

Misread the details, got it now. Thanks

 

[IpswichSox]

The Wall Street Journal weighs in this morning, including on the tax question on the deferred income:

The deferrals will result in tax benefits for Ohtani himself, according to a person familiar with his negotiations. During the first 10 years, he will be subject to state income taxes on his annual $2 million salary in California and other states where the Dodgers play. But by the time he starts receiving the $68 million payments, he may be able to avoid state income taxes by living someplace like Florida without an income tax, or by moving back to Japan.

The contract will also have implications for the Dodgers’ payroll under MLB’s luxury tax rules, which calculates its average annual value based on actual yearly salary ($2 million, in this case) and the present day value of the deal (roughly $44 million). As a result, the Dodgers will take a $46 million hit against their luxury tax payroll each season, a record-setting annual average value, but a steep decrease from a $70 million per year hit if the salary were paid out in full during the course of Ohtani’s contract.

Link (paywall)

 

[VORP Speed]

Thread title should be updated to LA Tax Dodger

 

[YTF]

Imagine how much Olive Garden 68m/yr could get ya?

Considering all of the speculation as to how much that deferral is actually going to be worth upon payout, Golden Corral might be a better option to stretch that adjusted $68 M per year.

 

[jarules1185]

All of which leads me to believe that for all the talk of keeping the Dodgers competitive, this is just a savvy tax minimization strategy that the Dodgers have structured to basically have the state of CA subsidize the contract.
Given that Shohei is not a US citizen, it really gets interesting if there is some way for the Dodgers to make the deferred payments to him in Monaco or whatever his tax haven of choice is that would be classified as non-US income. Then you’re talking $275m plus the $90m saved from CA.

Sounds great, avoid paying state / federal taxes (and some baseball luxury tax), take advantage of public money infrastructure like $500M gondolas to Dodger stadium. Which they haven't yet admitted will use public money.

https://www.latimes.com/sports/dodgers/story/2023-12-05/half-a-billion-thats-the-latest-price-for-a-gondola-to-dodger-stadium

To me again the issue with this is that Ohtani gets the economic benefit of a larger contract (due to tax avoidance), the Dodgers get the CBT benefit of a smaller contract, the CBA gets distorted, other teams are disadvantaged and thus incentivized to find interest rate and tax loopholes of their own, and the actual taxpayers are left to fund the infrastructure to make it all run.

The public economic policy side is obviously more complicated and I won't pretend to be an expert, but I hope this scenario gets closed in the future.

 

[YTF]

I think Ohtani would be an average to above average OF if he gave up pitching entirely.

I don't think teams assume he is a DH only if the pitching stuff never works out.

I wonder how much of a concern that wonkie right elbow might be on throws from the OF.

 

[Awesome Fossum]

I feel like if California has a decade to figure it out, they'll be coming after that $680M one way or another.

 

[Red Right Ankle]

I feel like if California has a decade to figure it out, they'll be coming after that $680M one way or another.

It's a federal rule, no? Not much they can do unless the feds change the rule.

 

[BigMike]

It's a federal rule, no? Not much they can do unless the feds change the rule.

Of course the Feds may be coming for substantially more of it in 10 years than it is today as well

 

[mikcou]

Sounds great, avoid paying state / federal taxes (and some baseball luxury tax), take advantage of public money infrastructure like $500M gondolas to Dodger stadium. Which they haven't yet admitted will use public money.

https://www.latimes.com/sports/dodgers/story/2023-12-05/half-a-billion-thats-the-latest-price-for-a-gondola-to-dodger-stadium

To me again the issue with this is that Ohtani gets the economic benefit of a larger contract (due to tax avoidance), the Dodgers get the CBT benefit of a smaller contract, the CBA gets distorted, other teams are disadvantaged and thus incentivized to find interest rate and tax loopholes of their own, and the actual taxpayers are left to fund the infrastructure to make it all run.

The public economic policy side is obviously more complicated and I won't pretend to be an expert, but I hope this scenario gets closed in the future.

He's not getting out of federal tax. The Dodgers will need to withhold on that as it is a payment of employment income. As I mentioned upthread, there is a 10 year pension spread rule that allows people to only pay tax in residence state for deferred comp. I suspect that is what the LA times is referring to. I dont work in this area, but I would think it would be doable as many execs structure their deferred comp in this manner (e.g., move from NY/CA to Florida or Texas after retirement).

The feds got tired of people complaining that California especially was taxing retirement income when they no longer lived there so the federal goverment provided certain circumstances where states cannot tax it.

It's a federal rule, no? Not much they can do unless the feds change the rule.

Correct.

 

[jarules1185]

He's not getting out of federal tax. The Dodgers will need to withhold on that as it is a payment of employment income. As I mentioned upthread, there is a 10 year pension spread rule that allows people to only pay tax in residence state for deferred comp. I suspect that is what the LA times is referring to. I dont work in this area, but I would think it would be doable as many execs structure their deferred comp in this manner (e.g., move from NY/CA to Florida or Texas after retirement).

The feds got tired of people complaining that California especially was taxing retirement income when they no longer lived there so the federal goverment provided certain circumstances where states cannot tax it.

So he's very potentially getting tens of millions in CA benefits.

On the federal side - I certainly believe you, but am curious when this withholding occurs. Are you saying the Dodgers would be withholding taxes on income that they may be paying to him when he is fully outside of the United States? Ie, the withholding would occur in say 2035, when he's potentially living in Japan? I guess with the US-Japan tax treaty, Japan would cede this taxable income to the US, given that the business that paid him was located in the US / work was done in the US.

 

[mikcou]

So he's very potentially getting tens of millions in CA benefits. On the federal side - I certainly believe you, but am curious when this withholding occurs. Are you saying the Dodgers would be withholding taxes on income that they may be paying to him when he is fully outside of the United States? Ie, the withholding would occur in say 2035, when he's potentially living in Japan?

Yes. Deferred compensation is subject to withholding.

Edit: Given how public this is, the IRS would certainly go after him if they thought he owed additional money and use the provisions of the Japanese treaty to try to collect.

 

[AB in DC]

It's a federal rule, no? Not much they can do unless the feds change the rule.

Not to get all V&N, but seems very likely that Congress will take a close look at this.

 

[glennhoffmania]

I fail to see why they would care? This isnt creating more value for the player that isnt subject to the luxury tax. It's just correctly valuing payments that are being made significantly into the future. Said another way, Ohtani doesnt get 10/700 without the deferral so whether he got 10/470 or 10/700 with deferrrals, everyone comes out in the same spot.

This is exactly what I said yesterday. The deferral structure is unique but it doesn't change anything economically. He got what he got and for AAV and CBT purposes it's the same. The headline is shocking and distracting, but that's about it.

 

[radsoxfan]

I’m definitely no tax expert, but for the sake of argument, if you assume Ohtani gets out of all CA state tax on the 68M per year (but has to pay federal tax still) in 2034-2043, we’re talking a max of 8.3M each year if CA top tax rate of 12.3% is unchanged.

That 83M total 10-20 years in the future might be worth 40-50M now? I don’t know, someone can do the math. Certainly far less than 83M.

It does create a gap between what the dodgers are really paying and the value to Ohtani, but it’s not like it’s going to be anything approaching the 700M even with complete state tax avoidance.

The true value of the contract to Ohtani might be something like 10/500M (or slightly more?) rather than 10/460. Still certainly nothing close to 10/700 unless he is somehow getting out of federal taxes also.

 

[radsoxfan]

https://blogs.fangraphs.com/shohei-ohtani-is-getting-paid-eventually/

Some interesting stuff in this article.

One thing I didn’t think of…. When Ohtani has 680M due to him starting in 2033 he may just trade it for a partial ownership stake in the Dodgers.

 

[jarules1185]

I’m definitely no tax expert, but for the sake of argument, if you assume Ohtani gets out of all CA state tax on the 68M per year (but has to pay federal tax still) in 2034-2043, we’re talking a max of 8.3M each year if CA top tax rate of 12.3% is unchanged.

That 83M total 10-20 years in the future might be worth 40-50M now? I don’t know, someone can do the math. Certainly far less than 83M.

Assuming the same discount ratio from the $700M to $460M, the $83M in the mid-late 2030s is worth just under $55M in present day dollars. Avoiding $55M in state taxes while helping your employer some other amount of competitive baseball taxes seems like a win win for everyone but people who actually pay CA income tax and other teams.

I just personally think deferring 97% of your income as a mutual employer/employee tax avoidance strategy is not the kind of loophole baseball should be keeping around.

 

[Murderer's Crow]

Any word on opt outs or trade clauses? I assume no to the latter but I’m curious how an opt out would impact a deferred pmt.

 

[glennhoffmania]

Assuming the same discount ratio from the $700M to $460M, the $83M in the mid-late 2030s is worth just under $55M in present day dollars. Avoiding $55M in state taxes while helping your employer some other amount of competitive baseball taxes seems like a win win for everyone but people who actually pay CA income tax and other teams.

I just personally think deferring 97% of your income as a mutual employer/employee tax avoidance strategy is not the kind of loophole baseball should be keeping around.

There's nothing wrong with tax planning. Every wealthy person does it every day. This is a unique situation because the player has so much outside income that he doesn't need his salary to still be incredibly wealthy. But deferring income and tax, reducing total liabilities, etc., isn't inherently shady.

Again, if the market says he's worth 450m then it doesn't matter how he gets it or when he gets it. The only issue would be if he's actually worth a lot more and took a huge discount because his agent is stupid and Ohtani didn't understand what he was signing.

 

[jarules1185]

There's nothing wrong with tax planning. Every wealthy person does it every day. This is a unique situation because the player has so much outside income that he doesn't need his salary to still be incredibly wealthy. But deferring income and tax, reducing total liabilities, etc., isn't inherently shady.

Again, if the market says he's worth 450m then it doesn't matter how he gets it or when he gets it. The only issue would be if he's actually worth a lot more and took a huge discount because his agent is stupid and Ohtani didn't understand what he was signing.

As an aside, I personally think that clearly earning economic value in a place (he likes California, but doesn't want to pay back into it) and doing your absolute best to pay a VERY tiny fraction of what you theoretically should owe given the spirit of the rules is not some commendable achievement. Rich individuals using their unique leverage to pay very little taxes, despite heavily benefitting from the system that taxes pay for, is certainly pervasive but is it desirable? I know, this is not a baseball subject, so I won't press it.

But I think it's more than that, because it's not just tax planning, it's potentially an exchange of competitive tax benefits for the Dodgers and personal tax benefits for Ohtani.

Baseball has competitive balance rules for a reason. Rules generally exist to prevent this kind of market distortion - backloading contract salaries doesn't touch the AAV, but apparently backloading them to 5 seconds after the contract period ends does - and I think they should be extended to prevent this as well.

 

[TapeAndPosts]

Any word on opt outs or trade clauses? I assume no to the latter but I’m curious how an opt out would impact a deferred pmt.

View: https://twitter.com/Alden_Gonzalez/status/1733581759084896400


View: https://twitter.com/BNightengale/status/1734395780423930265

They are stuck with each other!

 

[santadevil]

As an aside, I personally think that clearly earning economic value in a place (he likes California, but doesn't want to pay back into it) and doing your absolute best to pay a VERY tiny fraction of what you theoretically should owe given the spirit of the rules is not some commendable achievement. Rich individuals using their unique leverage to pay very little taxes, despite heavily benefitting from the system that taxes pay for, is certainly pervasive but is it desirable? I know, this is not a baseball subject, so I won't press it.

I'm just wondering how you think a rich person is "heavily benefitting" from the system? Just in general. Not a shot at you, I'm just wondering if you feel that a richer individual uses 20 times more of the services ($2M salary vs. $100K) than a regular person

I understand that Shohei should pay his fair share of taxes, but I don't think he's screwing over everyone in CA by deferring this contract either

 

[djbayko]

View: https://twitter.com/Alden_Gonzalez/status/1733581759084896400

It's impossible to know who that would benefit anyways.

 

[djbayko]

View: https://twitter.com/JFrankensteiner/status/1734402865915896169

 

[jarules1185]

I'm just wondering how you think a rich person is "heavily benefitting" from the system? Just in general. Not a shot at you, I'm just wondering if you feel that a richer individual uses 20 times more of the services ($2M salary vs. $100K) than a regular person

I understand that Shohei should pay his fair share of taxes, but I don't think he's screwing over everyone in CA by deferring this contract either

If you're asking whether folks with very high incomes should have their taxes capped at a max value rather than continue to pay a % of their income, I think that's just a different subject.

Ohtani is working for a CA franchise for 10 years and clearly earning income ($700M nominal, ~$460M real) in CA over those 10 years. Yet it seems he will only pay taxes on 3% of it. Does the fact that he's already rich enough to just accept the money later mean he shouldn't have to pay those taxes? That money is clearly not being earned in Florida.

 

[glennhoffmania]

I'm just wondering how you think a rich person is "heavily benefitting" from the system? Just in general. Not a shot at you, I'm just wondering if you feel that a richer individual uses 20 times more of the services ($2M salary vs. $100K) than a regular person

I understand that Shohei should pay his fair share of taxes, but I don't think he's screwing over everyone in CA by deferring this contract either

I was going to respond to this but it's probably more V&N than MLB. But it's an interesting topic for a V&N thread.

 

[Gdiguy]

I was going to respond to this but it's probably more V&N than MLB. But it's an interesting topic for a V&N thread.

'Should rich people have to pay income taxes' is maybe V&N thread (though I don't know it's really an interesting one)... but I do think this is a loophole that will be closed rapidly. The intent of allowing deferred compensation wasn't to allow someone to defer 97% of their income in order to enable them to never pay state income tax, and I can't imagine CA is going to allow this without a fight, as the precedent is terrible with a really public example.

There's nothing wrong with tax planning. Every wealthy person does it every day. This is a unique situation because the player has so much outside income that he doesn't need his salary to still be incredibly wealthy. But deferring income and tax, reducing total liabilities, etc., isn't inherently shady.

Again, if the market says he's worth 450m then it doesn't matter how he gets it or when he gets it. The only issue would be if he's actually worth a lot more and took a huge discount because his agent is stupid and Ohtani didn't understand what he was signing.

I mean we have different definitions of 'shady' here; in this case I don't think it's shady because I don't think they designed this contract with that goal in mind (it seems pretty clear that the actual goal here was to be able to claim a higher essentially made-up salary # for press reasons, but have a lower actual number for CBA/etc reasons)... but I do think that if one deliberately structured their salary in order to avoid paying taxes on 90%+ of it, that's certainly not something I'd view as model citizenship. It's not illegal, but there's a wide gulf between 'not illegal' and 'honorable'

 

[jarules1185]

I mean we have different definitions of 'shady' here; in this case I don't think it's shady because I don't think they designed this contract with that goal in mind (it seems pretty clear that the actual goal here was to be able to claim a higher essentially made-up salary # for press reasons, but have a lower actual number for CBA/etc reasons)... but I do think that if one deliberately structured their salary in order to avoid paying taxes on 90%+ of it, that's certainly not something I'd view as model citizenship. It's not illegal, but there's a wide gulf between 'not illegal' and 'honorable'

I won't opine on what makes something shady, honorable, or model citizenship, but I will say it's extremely unlikely they did not structure it with tax avoidance in mind. This amount of money buys very financially-motivated and smart advisors. They didn't luck into avoiding $50M+ in state taxes, if Ohtani does intend to leave CA after his contract / retirement.

 

[mikcou]

'Should rich people have to pay income taxes' is maybe V&N thread (though I don't know it's really an interesting one)... but I do think this is a loophole that will be closed rapidly. The intent of allowing deferred compensation wasn't to allow someone to defer 97% of their income in order to enable them to never pay state income tax, and I can't imagine CA is going to allow this without a fight, as the precedent is terrible with a really public example.

California cant control it; the federal government has stipulated that is the result under its commerce clause powers for certain annuity and retirement payments. Maybe the feds revisit that due to this example, but there are a lot of snowbirds who have a vested interest in keeping this rule around and changing a federal statute for a single example of someone taking the rule to the limit isnt exactly a great use of legislative time. Designing a scheme that would protect your normal retirees, but target Ohtani (and perhaps some other high end business execs) would not be an easy law to write or administer.

 

[radsoxfan]

I have no idea if 10 years from now Ohtani will dodge some taxes or not. But I’m seeing people on Twitter etc claiming the 10/700 with deferrals is a “win-win” because of the tax issues.

To be clear, Ohtani would be better off with a standard 10/700M contract at 70M per year and paying all his CA tax than this contract and (potentially) avoiding state tax. That traditional 10/700 contract was certainly not on the table.

He definitely would make some extra $ if he can skirt the tax laws but it’s not as much as he’s giving up by deferring all this money to begin with.

Ohtani’s market either wasn’t as strong as some thought or he just wanted the dodgers no matter what. 10/450-500M seemed like the floor from some of the rumors out there, and that’s basically what he took.

 

[DeadlySplitter]

https://theathletic.com/5133154/2023/12/12/giants-shohei-ohtani-offer-buster-posey/?source=user_shared_article

Giants came out with a lot of details on their pursuit last night. Feels believable to me with Buster Posey providing a lot of commentary.

 

[CodPiece XL]

Apparently.. in the last 48 hours his shirt sales have broken all records for the Dodgers. Which I suppose is not surprising.

 

[DeadlySplitter]

If ownership or the general manager of the Dodgers changes in the next 10 years, Ohtani can opt out.

https://apnews.com/article/shohei-otani-dodgers-3fe44e39efc42674f75b5233cc01b149

 

[tims4wins]

If ownership or the general manager of the Dodgers changes in the next 10 years, Ohtani can opt out.

https://apnews.com/article/shohei-otani-dodgers-3fe44e39efc42674f75b5233cc01b149

How would that work money wise? Would he be giving up $680M+ ??

 

[jon abbey]

How would that work money wise? Would he be giving up $680M+ ??

The contract is still $70M per year, even if most of it is deferred, so if he opted out because of new ownership after five years, they'd have paid him $10M and owe him the other $340M deferred.