Shohei Ohtani’s Contract With Dodgers Might Bring A Change In The Californian Tax Law 

Congress should take “immediate and decisive action” to limit deferred income for higher incomes, according to California’s controller, Shohei Ohtani’s inked a $700 million contract with the Los Angeles Dodgers just a month ago.

Shohei Ohtani’s Contract With Dodgers Might Bring A Change In The Californian Tax Law

With a 10-year deferral of $680 million, the record-breaking contract signed by the Japanese pitcher has sparked concerns regarding future state taxability, particularly in the event that Ohtani decides to leave California. The highest tax rate in California for 2024 is 14.4%, plus a 1.1% payroll levy.

“The current tax system allows for unlimited deferrals for those fortunate enough to be in the highest tax brackets, creating a significant imbalance in the tax structure,” California State Controller Malia Cohen said in a statement Monday regarding Ohtani’s deal.

Cohen argues that unrestricted tax deferrals for the wealthiest people are a contributing factor to the disparities in income distribution and that these imbalances should be addressed.

“The absence of reasonable caps on deferral for the wealthiest individuals exacerbates income inequality and hinders the fair distribution of taxes. I would urge Congress to take immediate and decisive action to rectify this imbalance.”

Ohtani may not live in California after his Dodger career ends in 2034, so part of his deal plan includes possible tax benefits.

An estimate from the California Center for Jobs and the Economy suggests that Ohtani might save $98 million over the course of his contract by deferring $68 million a year for ten years. The precise details of Ohtani’s contract are unclear, and the estimate is based on a number of assumptions.

Cohen’s proposal is to recalculate Ohtani’s contract’s tax treatment. Rather than tax him on the $2 million salary per year, the plan calls for capping deferrals and then charging a larger proportion of income as taxes.

This action reflects larger concerns about tax justice and income inequality, as well as perceived loopholes and possible revenue losses related with large-scale contract deferrals.

California has a history of modifying laws to its advantage, sometimes even retroactively (as demonstrated by the 2023 statute that taxes specific trusts retroactively). However, changes to federal tax law—not simply California law—would be necessary to allow for deferred compensation arrangements similar to those of Ohtani.

It’s debatable how much retirement income is appropriate, but comparing current and delayed salary is one approach.

How many wins does Ohtani have?

Career Regular Season
G W-L IP
86 38-19 481.2

Is Ohtani a Hall of Famer?

Not only is this one of the greatest players we’ve seen, but it’s also among the most significant. Ohtani is already a Hall of Famer because, as we can already say, his tale of baseball in the twenty-first century would be incomplete without him.

 

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