Shohei Ohtani Inks Historic $700 Million Deal with LA Dodgers
Japanese baseball sensation Shohei Ohtani signed an unprecedented 10-year contract with the Los Angeles Dodgers.
Morgan Riley
- 2024-01-09
- Updated 11:03 PM ET
(NewsNibs) - The star pitcher and hitter's landmark deal is worth $700 million, bolstering the Dodgers' lineup with one of the most dynamic players in the sport. Ohtani, who has previously demonstrated remarkable two-way abilities, is expected to bring considerable prowess to the team. While the full terms of the contract have not been made public, sources indicate that $680 million would be deferred over a decade. The deferral arrangement raises questions about the potential tax implications for both the athlete and the state of California.
Tax Implications of Deferred Income
California's current top tax rate sits at 14.4% for the year 2024, inclusive of a 1.1% payroll levy. State Controller Malia Cohen has voiced concerns regarding high earners' deferred income, pushing Congress for legislative action. Cohen argues that the status quo perpetuates tax imbalances and income inequality. For Ohtani, deferring $68 million annually may lead to an estimated $98 million in tax savings across the span of his contract with the Dodgers. However, discussions on tax policy have largely centered on tackling unrealized capital gains rather than deferred earnings.
Potential Challenges to State Revenue
Complicating the tax scenario is a 1995 federal law that exempts nonresident retirement income from state taxation, which could include deferred compensation like Ohtani's. Given the size of Ohtani's earnings, any changes to how deferred income is taxed could have significant consequences. While California seeks fair tax collection from high-income residents, including professional athletes, constraints on taxing deferred income may constrain the state's revenue intake from this demographic. Lawmakers thus face a complex task in reassessing taxation regimes for high earners and managing their impact on public finances.
The record-setting contract for Ohtani is a testament to his exceptional talent and appeal in the sport of baseball. As legislative and tax discussions unfold, the impact of such deals on athletes and state economies will likely remain in the public eye. Meanwhile, fans and the Los Angeles Dodgers anticipate the value Ohtani will bring to the team during his historic tenure.
