Shohei Ohtani’s Contract Might Cost California $98M in Taxes

MLB megastar is deferring $680 million in pay to when he might live out of state.

PUBLISHED JAN 9, 2024 11:28 P.M.
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California State Controller Malia Cohen says tax deferral for Shohei Ohtani (inset) creates “a significant imbalance in the tax structure.”

California State Controller Malia Cohen says tax deferral for Shohei Ohtani (inset) creates “a significant imbalance in the tax structure.”   Public Domain

When Major League Baseball superstar Shohei Ohtani recently signed a $700 million free agent contract with the Los Angeles Dodgers, it came with a somewhat unusual caveat: $680 million would be deferred for more than a decade, with payments starting in 2035.

Such arrangements are not entirely unusual in baseball history, with notable players like Bruce Sutter, Ken Griffey Jr. and Bobby Bonilla among those who’ve taken deferrals on pay.

What is unusual and makes this worthy of mention at a place like California Local: There are tax implications for the Golden State.

Bill Shaikin of the Los Angeles Times had a piece out Jan. 8 noting that under current provisions, Ohtani could get out of paying as much as $98 million in state tax through his deferrals. This is because Ohtani could have returned to his native Japan, where he is wildly popular, by the time the deferrals kick in.

Shaikin’s piece includes a statement from California State Controller Malia Cohen that urges Congress to take reformative action.

“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,” Cohen’s statement reads. “The absence of reasonable caps on deferral for the wealthiest individuals exacerbates income inequality and hinders the fair distribution of taxes.”

Cohen’s statement goes on to suggest “introducing limits on deductions and exemptions for high-income earners” which would “create a more equitable tax system (and) also generate additional revenue that can be directed towards addressing pressing important social issues and fostering economic stability.”

It will be interesting to see if Ohtani’s contract leads to action either by Congress or the California State Legislature.

Read more in the article “Shohei Ohtani could avoid paying tens of millions in California taxes” on LATimes.com.

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