In an unprecedented move that is causing ripples across Major League Baseball, Shohei Ohtani, the reigning AL MVP and a phenom renowned for his dual prowess both on the mound and at the plate, has embraced the extraordinary. Ohtani has chosen to defer over 97 percent of his mammoth $700-million contract with the storied Los Angeles Dodgers, a decision that underscores his unique character and commitment to the game.
Insiders report that Ohtani, in his striking 10-year deal with the Dodgers, will be drawing a modest sum of $2 million annually. The seismic shock comes with the revelation that $680 million of his compensation is earmarked for the years 2034 to 2043, during which time he will command an eye-watering salary of $68 million per annum.
This daring financial construct will have the Dodgers shouldering a Competitive Balance Tax (CBT) of approximately $46 million, as stated by renowned baseball journalist Jeff Passan. With the CBT threshold projected to reached $237 million in 2024, the Dodgers’ willingness to enter such a contract signals a significant level of investment and confidence in the Japanese star.
Ohtani’s departure from the Los Angeles Angels to don the Dodgers blue was announced proudly on a Monday night, stirring excitement amongst the Dodgers faithful. “Dodger fans, thank you for welcoming me to your team,” Ohtani expressed. “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.”
The seismic Ohtani contract propels the Dodgers’ deferred financial obligations, when considered alongside those of Mookie Betts and Freddie Freeman, to an astronomical $857 million, to be paid out from 2033 to 2044. Mookie possesses a $365 million contract while Freeman holds a $162 million contract, each structured with significant deferral in payouts.
In the Dodgers’ fiscal landscape, the years 2038, ’39, and ’40 loom large with combined obligations to the triumvirate reaching upwards of $83 million and $84 million, respectively.
The MLB’s rules dictate a punitive tax framework for clubs surpassing the CBT threshold, with consecutive years of breach resulting in escalating tax rates, an economic deterrent meant to promote competitive balance across teams.
Los Angeles, with its colossal payroll estimated at $236 million, narrowly eclipses the previous CBT threshold, further positioning the franchise as a financial juggernaut with a penchant for ambitious contracts.
Passan divulges that within MLB’s collective bargaining agreement, deferral of contracts is not subject to specific limitations, a clause Ohtani astutely leveraged. The deliberate deferral by Ohtani is seen as a strategic play, granting the Dodgers latitude to enhance their roster and cementing his position as the highest-earning player in the league.
Additionally, by opting to collect this fortune during a period when he might no longer reside in the United States, Ohtani could potentially enjoy considerable tax benefits. This is notably pertinent when considering California’s top residential tax rate of 13.3%.
The financial intricacies of the deal have set the stage for a new era in player contracts and salary structuring, with Ohtani at the vanguard. His bold decision speaks volumes of his character, blending financial savvy with an undiminished dedication to team-success, as he becomes a prominent figure shaping the future of baseball economics.