Shohei Ohtani, the baseball sensation, recently signed a record-setting contract with the Los Angeles Dodgers. What’s intriguing about this deal isn’t just the jaw-dropping $700 million figure but also how it’s structured to minimize Ohtani’s state tax payments potentially. California, known for its high-income taxes, could see a significant delay in collecting taxes from Ohtani due to the unique contract terms.
The Dodgers will pay Ohtani $20 million over the next decade while he continues to play for the team. However, the actual financial impact will come in the following decade when he’s set to receive $68 million per year from 2034 to 2043. By then, Ohtani will be 40 years old, when most baseball players retire. He could choose not to reside in California, potentially avoiding the state’s hefty income tax and payroll tax for State Disability Insurance, which could save him millions……….[read more]
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This arrangement raises questions about the intersection of sports contracts, taxation, and financial planning. How do athletes, their agents, and lawyers structure contracts to optimize their earnings while complying with tax laws? How do such deals affect states like California, which heavily rely on taxes from high-income individuals? And more broadly, what can we learn about wealth distribution and taxation from this scenario?
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