Shohei Ohtani’s $700M deal prompts California controller to call for caps on deferred taxes
By Ryan General
January 10, 2024
California Controller Malia M. Cohen is calling on the U.S. Congress to amend the tax code and impose caps on deferred payments following Shohei Ohtani’s historic $700 million deal with the Los Angeles Dodgers.
Ohtani’s contract structure: Ohtani’s groundbreaking 10-year contract has him making $2 million per year until 2034, deferring $68 million of his $70 million annual salary. The baseball superstar will then make $68 million annually from 2034-43.
Potential tax savings: In a press statement released on Monday, the California Controller argues that if Ohtani relocates from California before receiving the $680 million in deferred payments, he could bypass the state’s 13.3% income tax and 1.1% payroll tax for State Disability Insurance. The California Center for Jobs and the Economy estimates a potential tax saving of $98 million for Ohtani by deferring the income.
Call for reform: Cohen, who assumed the role of controller last year, stated that the current tax system’s lack of reasonable caps on deferrals for high-income individuals contributes to “income inequality” and hinders “fair tax distribution.” She asserts that introducing limits on deductions and exemptions for high-income earners promotes social responsibility and contributes to a more just tax system.
In a broader context: Experts suggested that lawmakers have not prioritized deferred income, focusing instead on unrealized gains and investment growth. Pundits, however, warn that limiting deferred income may put states in a disadvantageous position regarding revenue collection from high earners.
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