Shohei Ohtani will defer over 97 per cent of his $700-million contract with the Los Angeles Dodgers until the end of the deal, according to multiple reports.
ESPN’s Jeff Passan reports that the reigning AL MVP will earn $2 million each season in his record-breaking 10-year deal, with $680 million being deferred to 2034-2043.
He will earn $68 million per year over that span.
Passan reported that the Competitive Balance Tax (CBT) hit will come in around $46 million for the Dodgers. In MLB’s collective bargaining agreement, the CBT threshold will be $237 million in 2024.
A unique two-way superstar as both a hitter and pitcher, the 29-year-old Ohtani left the Los Angeles Angels as a free agent to sign with the Dodgers in a deal they announced Monday night.
“Dodger fans, thank you for welcoming me to your team,” Ohtani said in a statement released by the club. “I can say 100 percent that you, the Dodger organization and I share the same goal — to bring World Series parades to the streets of Los Angeles.”
Ohtani’s contract, combined with those of Mookie Betts and Freddie Freeman, raises the Dodgers’ total of deferred money owed to the three to $857 million from 2033-44.
Betts has a $365 million deal covering 2021-32 that includes $115 million in deferred salaries payable from 2033-44 and has the final $5 million of his signing bonus payable from 2033-35.
Freeman has a $162 million, six-year deal for 2022-27 that includes $57 million in deferred money payable from 2028-40.
Los Angeles’ high points of the deferred payments are 2038 and ’39, when the trio will be owed $83 million, and 2040, when they will be due $84 million.
Per MLB, “A club that exceeds the Competitive Balance Tax threshold is subject to an increasing tax rate depending on how many consecutive years it has done so.”
The first year of exceeding the tax rate results in a 20 per cent tax on all overages, the second year carriers a 30 per cent rate on all overages and after three years or more, the tax on all overages is 50 per cent.
According to FanGraphs’ Roster Resource, Los Angeles’ estimated final 2023 payroll was $236 million — $3 million higher than the $233 million threshold last season.
Passan shared “that there is a specific article in the collective-bargaining agreement that addresses” deferred money that states there are no limitations on the amount of money that can be deferred in a contract.
The deferrals were reportedly proposed by Ohtani to give the Dodgers the opportunity to continue adding to the roster after making him the highest-paid player in MLB history.
By receiving the vast majority of the money when he presumably will not be living in the United States, Ohtani also figures to have a tax benefit. California’s top tax rate for residents is 13.3%.
– With files from The Associated Press.
