SACRAMENTO, Calif. – In a move that moonwalks around California's notorious income taxes, Shohei Ohtani's record-setting contract with the LA Dodgers could offer a whammy of a bonus – major tax savings. The players and lawyers that masterminded this strategic plan might have given the mighty Dodgers the ability to slide past even the highest income taxes in the nation, changing the game yet again.
This isn't a straightforward tax dodge, though. It's an intricate ballet – or rather, a well-coordinated base-running showdown – in which timing is everything. Over the next decade, the Dodgers will shell out a cool $20 million to Ohtani who will, barring injuries, take on the dual role of batter and pitcher for the force that is the Dodgers.
But here's where it gets interesting. From 2034 to 2043, a decade when most MLB players are hanging up their gloves and seeking solace in retirement, the Dodgers will start to really dig deep, paying Ohtani a staggering $68 million per year. This clever set-up - with 97% of Ohtani’s Dodgers income deferred, means that Ohtani, if he decides to hang up the cleats and ditch California living, could potentially avoid the 13.3% state income tax and 1.1% state disability insurance payroll tax on the lion's share of his earnings.
This tax dance, however, brings a tricky situation for California. The state, already strapped with a hefty budget deficit, will have to twiddle its thumbs anxiously for at least a decade before it can sink its teeth into Ohtani's tasty income.
To complicate matters further, the terms of 'Jock Tax' mean that athletes darting back and forth between states and their sporting commitments can keep tax officials on their toes. That mega match with the Mets in LA? That's a taxable event, folks. And with no income tax in Texan, Tennessee or Florida, it's a tempting notion for the jet-setting athlete.
Ohtani himself appeared nonchalant about the contract details at his introductory press conference. His mindset – not personal gain, but freeing up funds for the Dodgers to secure top-notch talent.
Yet, the Ohtani contract maneuver not only reveals the complexity of sports stars' finances but also demonstrates the delicate balance California is attempting to walk financially. High-earning taxpayers have a significant influence on the state's revenue, and when one fetches his proverbial coat, the impact shakes the state's coffers.
As the world watches Ohtani pitch and swing with celestial brilliance, California's financial gurus will also have their eyes trained keenly on the upcoming budget deficit challenge. Regardless of their financial acumen, it's clear they're going to need a few more Shohei Ohtanis – about 317 more, to be exact – to bridge the gap.
But as Chris Hoene, executive director of the California Budget and Policy Center, points out, it's only fair after all. Given the enormous wealth gap, why shouldn’t those who benefit more, who have more, pay more? The debate will continue to rattle on, just like the thunderous applause in the Dodger Stadium as Ohtani steps up to the plate. So, let the games begin!
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