Exclusive @TheAthletic: Shohei Ohtani will defer $68 million per year of his $70 million annual salary over the course of his 10-year, $700 million deal with the Dodgers, allowing the team to keep spending, according to a person briefed on the terms.https://t.co/IsnWlsbTq9
– Fabian Ardaya (@FabianArdaya) December 11, 2023
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He was expected to break the bank, and that’s exactly what happened.
Doing a quick calculation without any other data, we understand that the Japanese sensation will earn $70 million a year. That’s an impressive sum for an athlete, but… not so fast.
According toThe Athletic, Ohtani has agreed to receive only $2 million per season until his contract is up. The Dodgers will have to pay him the remaining amount when his contract expires…
It’s not complicated: he wants to enable his club to sign other talented players, to give himself a better chance of winning the World Series.
This is, well… pretty special. The Dodgers may be thinking that $68M per year starting in 2034 will hurt less to pay than it does now, and that makes sense in a way because revenues keep rising in MLB.
But $68 million today and $68 million 10 years from now are not the same thing. Since there’s no interest payable to Ohtani, he accepts that the club collects the interest for him.
However, Ohtani earns around $50 million a year in sponsorship alone. He’s not too worried about the finances, so…
Note that the amount that will be entered under the luxury tax for the Dodgers will be $46 million, since in net present value terms, his contract is worth $460 million. So, they’ve got plenty of money to look for reinforcements. The club really needs starting pitchers in the short term.
It’s also worth noting that taxes in California are higher than elsewhere. If the pitcher and hitter of choice no longer lives there when his contract expires, he could potentially save money there.
Shohei Ohtani’s decision to earn just $2 million a year certainly is a great benefit to the Dodgers’ payroll, but also a stroke of genius for tax repercussions.
If he’s not living in California once his deferred payments start, he will not be subjected to heavy California tax.– Bob Nightengale (@BNightengale) December 11, 2023
Nathan MacKinnon decided a few years ago to sign at a discount with the Avalanche so he’d be in a position to win, and his strategy worked. That said, we rarely see NHL players put the team’s success ahead of their own financial success… And that’s why I tip my hat to Shohei Ohtani.
Ohtani knows how to make new friends quickly, let’s put it that way.
Highlights
– It makes sense. He scored 39 goals last season, after all.
Rutherford: Canucks will ‘keep open mind’ for solution to Kuzmenko’s struggles https://t.co/RUIbNNq4ky
– theScore NHL (@theScoreNHL) December 11, 2023
– The team is starting to take shape.
LPHF: Montreal announces contracts for Tereza Vanisova and Gabrielle Davidhttps://t.co/jnjP2xFWtP
– RDS (@RDSca) December 11, 2023
– A returner in Montreal.
Montreal CF acquire defender Raheem Edwards from LA Galaxy. More information
https://t.co/7yy72Zsbx1
CF Montréal acquires defender Raheem Edwards from LA Galaxy. More info
– CF Montréal (@cfmontreal) December 11, 2023
