OHTANI’S NEW CONTRACT SETS DANGEROUS PRECEDENT FOR MLB

2023-12-14 · 3 min read · MLB/Baseball
LA Dodgers Shohei Ohtani

AP Photo/Ashley Landis | CA Times

Blue Jays fans across the country have had plenty to be mad at over the last week - losing out on Ohtani was tough, but the self-righteous Americanism that followed in the wake of his 10-year, $700 Million contract with the Los Angeles Dodgers was a gut punch.
For many years over many sports, Toronto has developed somewhat of an inferiority complex. Admittedly, we haven’t helped ourselves a ton - much is self-inflicted, though a far greater amount spreads steadily across the border from the United States. Sports journalism is infected with a virus in which such an emphasis on ‘being the first one to report’ outweighs a more complete analysis of the bigger picture. The merits of Jon Morosi and J.P. Hoornstra can be debated and the strategy of Nez Balelo - Ohtani’s agent - can be scrutinized, but it all goes back to the feeling that Toronto, and by extension Canada, was taken advantage of. Used as leverage, nothing more - perhaps a great deal less.
We’ve all heard plenty of it, how Shohei Ohtani’s new deal with the Dodgers is good for baseball - it’s not. Full stop.
Deferrals, such as the ones Ohtani has agreed to, are dangerous at best and abusive at worst. That’s not to say it isn’t smart, Shohei fooled us all and now has a boatload of money to show for it. Or more accurately, he eventually will.
With more and more details of his new contract being released, the outline of his contract may seem perplexing at first; from 2024-2033 Shohei Ohtani’s yearly contract will be at $2 Million per year, while from 2034-2043 he will be paid $68 Million per year. This is to help alleviate Luxury Tax restrictions from impeding the Dodgers’ willingness to sign other players for large amounts of money, with a $70 Million annual salary being incredibly expensive - even by Los Angeles’ standards.
What this also means is that of that deferred money, guidelines for Federal and State Income Tax change. California, which has the highest Income Tax of any state, will effectively be losing out on much of Ohtani’s due in taxes for at least the next ten years. When his contract ends and his deferrals begin, he could - in theory - save a great deal of money by living in a state with a considerably lower Income Tax bracket. What originally was seen as a basic $70 Million per season deal was, in reality, never a rational concept. At least not for a deal that large in a state like California.
Balelo and the Dodgers cheated the system, that much is clear. The deal didn’t break any CBT agreements or MLB contractual policies, and deferrals are very clearly stated in the CBA as saying “There shall be no limitations”. For the individual, it’s clever. For the MLB - not to mention the people of California - not so much.
Ohtani’s deal sets a dangerous precedent; bend tax rules on major contracts and no penalty shall come of it. It’s a twofold problem, financially and ethically. Optics are front and center in the public’s eyes, and what the public sees right now is Cooper Criswell - he of 12 career MLB games and a combined ERA of 5.97 - making only $1 Million less than Ohtani in 2023. Ethically, there’s a conversation to be had about anyone, much less a generational athlete, purposely skirting their moral obligations of paying taxes.
There will always be a debate about how much athletes make when compared to the salaries of doctors and teachers, so much so that individual states have different iterations of “jock taxes”. It’s not Ohtani’s fault that any of this is allowed, nor is it Nez Balelo’s or Los Angeles’. Is it legal? Yes. But does it look bad? Absolutely.
Beyond the $68 Million a year in deferrals, Ohtani’s contract also has abnormal clauses. Today it was reported that one such clause would allow Ohtani the option to opt-out of his contract should controlling Owner Mark Walter sell his majority share of the organization or if General Manager Andrew Friedman loses his job. Additionally, unconfirmed reports are that Ohtani’s translator Ippei Mizuhara also has job security in his new deal.
Ohtani will also retain an in-stadium suite at Dodger Stadium for all regular and postseason games. He is also expected to donate no more than 1% of his contract to the club’s charity - an interesting clause that’s been recently publicized by the Atlanta Braves.
So, is this really good for baseball? Of course not. Even fans outside of Toronto’s “small market” club can see that. The lights are bright in Dodger Stadium, but they cannot outshine the court of public opinion. And when Los Angeles visits Toronto from April 26th to 28th, we’ll see what this “foreign country” thinks.
Sports Tree Profile

By: Gus Cousins

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