In the high-stakes world of Major League Baseball contracts, the Los Angeles Dodgers have once again thrown down the gauntlet, this time with their jaw-dropping $700 million deal with Shohei Ohtani. While the headline figure may raise eyebrows, the devil is in the details, and boy, are they intriguing.
Ohtani's contract, inked last Saturday, unveils a unique financial strategy that has tongues wagging and fans scratching their heads. The Japanese sensation will pocket a mere $20 million over the next decade, with the remaining $680 million deferred until the years 2034-2043. Yes, you read that right—2034-2043!
According to the details dug up by The Associated Press, Ohtani's annual salary will balloon to $70 million, making him one of the highest-paid players on the Dodgers' roster. However, here's the twist: a staggering $68 million of that annual payday will be deferred, sans interest, and paid out in equal installments every July 1 from 2034-2043.
For luxury tax purposes, the Dodgers will see a yearly increase of about $46 million to their payroll due to Ohtani's contract. When you add the deferred payments of Mookie Betts and Freddie Freeman into the mix, the Dodgers find themselves committed to a whopping $857 million in deferred money from 2033-2044.
Betts, with his $365 million deal covering 2021-2032, boasts $115 million in deferred salaries payable from 2033-2044. Not to be outdone, Freeman's six-year, $162 million deal for 2022-2027 includes $57 million in deferred payments, payable from 2028-2040.
So, when are the Dodgers going to feel the financial pinch the most? Look no further than 2038 and '39, where the trio of Ohtani, Betts, and Freeman will collectively rake in a jaw-dropping $83 million. The year 2040 isn't too shabby either, with an anticipated $84 million due to the dynamic trio.
One can't help but wonder about the financial acumen behind this strategy. By front-loading the deferred payments, the Dodgers are making a strategic move that could pay dividends down the line. Ohtani, in particular, stands to benefit from receiving the lion's share of his money during years when he presumably won't be residing in the United States. As a bonus, this clever maneuver could also yield tax benefits, especially considering California's top tax rate for residents is a hefty 13.3%.
So, what does Shohei Ohtani's historic signing mean for the Los Angeles Dodgers? It's a financial chess move that could either revolutionize MLB contracts or leave the Dodgers scratching their heads in the years to come. Only time will tell if this gamble pays off or if the Dodgers have bitten off more than they can chew. One thing's for sure—the baseball world will be watching.
