What makes Shohei Ohtani’s 10-year contract intriguing?
Shohei Ohtani, a Major League Baseball player, recently made headlines with his groundbreaking 10-year contract with the Los Angeles Dodgers, valued at $700 million. What makes this deal particularly intriguing is its unique structure. Instead of a typical high annual salary, Ohtani is set to earn a modest $2 million per year over the contract’s duration. This arrangement contrasts sharply with his impressive earnings from endorsements, which are believed to be upwards of $45 million annually, solidifying his status as MLB’s most marketable player.
The financial intricacies of Ohtani’s deal reveal a strategic approach to salary distribution. A significant portion of the contract value, amounting to $680 million, is deferred. This means Ohtani will receive annual payments of $68 million from 2034 to 2043, long after the contract’s active years. This deferral benefits Ohtani and provides the Dodgers with financial flexibility. In 2024, Ohtani’s ranking as the 17th highest-paid Dodger enables the team to allocate resources effectively, enhancing their capability to build a competitive squad around him.
However, Ohtani’s earnings are subject to various taxes. He will pay 37% in federal tax and 13.3% in California state tax, along with additional charges for Medicare, Medicare surcharge, and State Disability Insurance (SDI), significantly reducing his take-home pay. Despite these deductions, the arrangement remains beneficial for Ohtani and the Dodgers.
Questions have been raised regarding the legality of such a deal. The Collective Bargaining Agreement (CBA) under Article XVI clarifies that there are no limitations on the amount of deferred money in a contract, making Ohtani’s deal completely legal. This creative structuring allows the Dodgers to retain one of baseball’s elite players at a comparatively low cost for the next decade, demonstrating a savvy blend of sports acumen and financial strategy………
Rising Dough
Consider the economic and business implications when a top athlete like Ohtani defers a large portion of their contract’s value. How might this strategy influence the team’s short-term and long-term financial planning, and what are the potential benefits or risks for the player regarding financial security and market value?
*After reading the Half Loaf article, join the conversation below by telling us your thoughts.
☕️ **Discover Stone Street Coffee Company – Your Coffee Haven!**
Today’s Dough readers, if you’re on the hunt for exceptional coffee and cold brew, look no further than Stone Street Coffee Company. We at Today’s Dough are smitten with their rich coffee blends and refreshing Cold Brew. Stone Street’s commitment to quality shines through in every sip. Now, exclusively for our readers, click the banner above to snag a $5 off coupon on your next order. Experience the finest, ethically sourced beans roasted to perfection. Join the Stone Street community, savor top-notch coffee, and elevate your daily brew. ☕️🌟
Share this content:
