After Shohei Ohtani signed his $700 million 10-year contract, which includes $680 million in deferred money, California state officials are looking at changing the tax code.
California Controller Malia Cohen is asking Congress to cap deferred payments, which would ensure the state receives more money from the baseball star’s lucrative contract, the richest ever signed in North America.
Ohtani has opted to defer $68 million of his annual salary every year, meaning the payments will be made from 2034-2043, so the team can continue to spend money on high-caliber players.
Because the money is deferred, if Ohtani is not living in California at the time of his deferred payments, he could avoid the state’s 13.3% income tax and 1.1% payroll tax for State Disability, according to The Associated Press.
If Ohtani were to leave the state for the period of his deferral payments, he would save $98 million in state tax, according to the California Center for Jobs and the Economy.
Cohen’s office shared on Tuesday, saying that the star should still pay taxes on the entirety of the contract, being that he is employed in the state.
“The contract is structured so that Ohtani will receive $2 million per year and defer the balance approximately 10 years, when he could potentially return to Japan and escape payment of California state income taxes on the deferred amount,” Cohen’s office said in the statement.
The California Controller is now arguing that the tax structure is too top-heavy in allowing unlimited deferrals.
“The current tax system allows for unlimited deferrals for those fortunate enough to be in the highest tax brackets, creating a significant imbalance in the tax structure,” Cohen said. “The absence of reasonable caps on deferral for the wealthiest individuals exacerbates income inequality and hinders the fair distribution of taxes. I would urge Congress to take immediate and decisive action to rectify this imbalance.”
Still, the exact terms of Ohtani’s contract have not been made public at this time.
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