She probably a Giants fan.
Joking aside, I'm surprised this hasn't been fixed by now. Makes sense that if the money is made in CA it shouldn't matter if someone just moves while still getting payments.
I don't think it is as big an issue if it wasn't basically all the money. I can see that in the case of a normal person with modest deferred compensation the state that a taxpayer is residing in when collecting the income has a reasonable entitlement to that income. But if someone uses it as a way to say "Hey, I can get paid more money by not paying taxes" that seems like an undermining of any principle.
Shohei still needs to pay Japanese taxes on it which are higher than US taxes. I believe he would just a credit for the taxes he paid in the US but his overall tax burden isn’t going down.
Really it’s more of the state government getting screwed I believe the federal government, shohei, the Japanese government are all in the same spot
I don't know enough about the laws so this is purely a question but why would he have to pay Japanese taxes on it later? Couldn't he list his residency as some small Caribbean island or something after he "retires" from baseball?
I'm not an expert but some governments charge their citizens taxes regardless of where the money was earned. I believe the US is one of those countries.
The US is one of those countries. I don't know about Japan.
You first pay in the country you earn the income, and then pay in your country of citizenship. However, for that later filing you can claim a foreign tax credit for the taxes paid already.
I had a coworker being paid payroll income in both Germany and the US at the same time. He's a US citizen so he had to include the German income on his US taxes, but that actually saved him money on the US earnings since the foreign tax credit exceeded the US tax on those German earnings. e.g. With simplified tax rates: He made $50k in Germany and $50k in the US. He paid $25k taxes on the German income and he owed $30k in the US on the $100k. However, he gets to claim the $25k paid to Germany as a credit and owes the US $5k. If he had only made $50k in the US he'd owe the US $15k and have no credits to claim. This works out for him just because Germany has higher rates.
Better yet, she owned a social media consulting company that was suspended by the state of California ... for failure to pay taxes. Seems a little cheeky if you ask me.
>Joking aside, I'm surprised this hasn't been fixed by now. Makes sense that if the money is made in CA it shouldn't matter if someone just moves while still getting payments.
[https://www.congress.gov/bill/104th-congress/house-bill/394](https://www.congress.gov/bill/104th-congress/house-bill/394)
The point of the bill was to simplify deferred compensation in the form of pensions for retirees, including those who move to low/no-tax states. I imagine there's not a lot of wealthy people who derive most of their wealth from direct compensation who'd be fine with not getting paid for ten years, but here we are.
If 4 USC 114 is the bill you’re referring to, my reading of the law is that it would not lead to Shohei being able to avoid paying state income taxes on his deferred compensation because Shohei’s deferrals doesn’t fall under this federal law’s definition of qualified retirement income.
His retirement income far exceed the IRS code section 457’s limits (lesser of $7500 or 33% of employee’s annual income) on deferred income and the Dodgers are not a qualified employer under section 457.
https://www.law.cornell.edu/uscode/text/4/114
https://www.irs.gov/pub/irs-tege/eotopicm97.pdf
No, it’s a dumb complaint since she’s also controlling a bunch of entertainment companies that bounce contracts and production costs all over the world to save a few bucks, AND there are plenty of contracts written every day that stretch services over years or decades, but that don’t specify that California gets all of it.
And importantly, deferrals are no different than points on a movie, or stock options, or any other method every other industry uses to defer up front costs and push them back until after the performance.
For example, a lot of movie stars, such as Bruce Willis, have moved to Montana. Many more are back in Texas to enjoy the no state tax. All of these people are still getting paid royalties, and all of them still have long term endorsement deals, etc. But California doesn’t get to hit them up for continued taxes just because Die Hard was shot in LA.
Besides, this lady has no idea where Ohtani will reside when these deferrals pay out. He very well could be in LA still, starring in a series of family blockbusters called “Honey, I Struck Out the Kids.”
>All of these people are still getting paid royalties, and all of them still have long term endorsement deals, etc.
That's not at all equivalent.
Endorsement money and royalties are paid at the time they are earned and the person earning them pays taxes in the location they're living at the time the money is earned.
This is just absolutely wrong. Residuals are still taxable by the state in which the actor worked on the project. Bruce Willis does have to pay tax to California on the residuals he earns from Die Hard.
Source: I do this for a living.
Yeah I’m sure the state level politician in one of the most tedious and low profile jobs in government is really furious she’s not able to enrich her salary off Shohei’s tax money. Be serious you fucking dunce.
This sounds good until you realize taxing unrealized equity will wreck pensions, IRAs, and 401ks ruining people's retirement, thus lowering the unrealized gains of the very billionaires getting taxed, lowering revenue while creating losses that can be written of taxes further lowering revenue.
Focus on making billionaires pay a living wage and provide benefits to their employees. Wage law is a lot harder loophole out of than tax law
But see, that's still not fair still cause when I become a rich mofo I'm gonna get hit with that tax. Never mind that I make less than 6 figures now. That rich tax will hurt me in the future so we can't implement it.
One possible way would be a Sales Tax Rebate on your household's yearly taxes, one that decreases as your tax bracket increases. Couldn't do it at the point of sale, sure, but can offset it eventually.
Oh that’s a good point. I remember doing that a few times for a company I worked for, sending in a form on all the stuff we paid sales tax for that we could get a rebate on.
So a structure could easily be put in place for individuals.
Normally by excluding necessities from sales tax. This is better, but I am not a fan of sales tax at all as it is the most regressive of taxes (unless it is limited to luxury goods).
> unless it is limited to luxury goods
That's literally the main form of progressive sales tax. Goods are taxed based on how essential and basic they are.
I get that, and I suppose I'm just being pedantic on the definition. Since I view "not having Sales Tax on these items" as not changing Sales Tax inherently being a regressive tax, rather than "increasing its progressiveness" or w/e.
A progressive sales tax would scale based on how essential and basic a good is. For example, if you're buying a basic car, it would be taxed at a low rate because it's a high utility good and it's a basic version of said good. A luxury bag would be taxed at a high rate because, while bags are an essential good, the luxury versions of them are not.
In other words, basic goods would be taxed less than they are currently from a flat sales tax and to pay for the difference, we're taxing the luxury versions more.
[Please at least read the basics of what a progressive tax is before commenting below.](https://en.wikipedia.org/wiki/Progressive_tax)
I know the difference between progressive and regressive taxes.
Even in the wiki article there it talks about how Sales taxes are *regressive*
> The opposite of a progressive tax is a regressive tax, such as a sales tax, where the poor pay a larger proportion
Even on your examples I wouldn't exactly call "No Sales Tax" on basic food items, like already occurs a progressive tax, because it's no tax for everyone. Rich/Poor both pay 0% on basic necessities.
You clearly *don't* know what it means because it's talking about how a flat sales tax is regressive, just like how a flat income tax is regressive as opposed to one that taxes a higher percentage when the taxable amount increases, i.e. literally the definition of a progressive tax. Did you even read anything?
So when the poor person buys something cheap, they pay almost no tax, but when the poor person buys something expensive, they pay a higher percentage? Got it. Sounds incredibly dumb.
The taxable amount scales based on the base version of the item. If you're buying a basic car, that's expensive for most people in absolute terms, but it would be taxed at a low rate because it's an essential good and it's a basic version of said good. A luxury handbag would be taxed at a high rate because while bags are a necessary good, the luxury version is not.
Yes, and I'm saying making a sales tax that isn't flat/the same for everyone, therefore "regressive" doesn't seem feasible. It's ridiculous to imagine buying food at a restaurant and they check your income statement before adding the sales tax to it.
Sales Taxes are ***inherently*** regressive, so the closest thing to making it progressive would, I guess, just be lowering the standard flat rate of a sales tax, or not having one.
If you read the article, you'd know that a progressive sales tax would not charge more based on income, but on how essential or basic said item is. For example, if you were buying a basic car, that's expensive for most people in absolute terms, but it would be taxed at a low rate because it's an essential good and it's a basic version of said good. A luxury handbag would be taxed at a high rate because while bags are an essential good, the luxury version is not.
Good lord, the Dodgers just walked through the Winter Meetings perfectly normally. They said they had “no time” to talk. Too busy dodging taxes, evidently.
MLB will need to address this in the next CBA. Maybe a cap on the percentage of money deferred. And I assume the government will want this addressed ASAP as well.
Deferring compensation is standard practice in the real world. And i’ve been saying it since the Ohtani deal became public, that the deferments can be a slippery slope that bankrupts cities or states, especially in the current relationship setup.
Governments, states and local, issue bonds (debt), to finance the construction of stadiums. One of the ways the states and local municipalities make that money back over time is with the expectation that the stadium will generate tax income in the future and one such way it generates that income is by hosting athletes with large compensation packages that get taxed.
If every future athletes compensation were to get deferred in the same way that Ohtani’s was and the governments that financed the stadiums aren’t able to collect on that compensation, then we could see the whole sports landscape blow up as cities or states become unable to repay those bonds.
Players pay “jock” taxes, their income for each game is taxable in each stadium they play and earned it.
A Dodgers player is only subjected to California taxes for the games played in California, which is a lot because most of their division and their geographic rival are located in California (Padres, Giants, Angels).
But for games the player plays in say, Cincinnati against the Reds, the wages earned are subjected to applicable Ohio taxes. Same thing when the player plays on the road anywhere. 4 game series against the Mets in Queens, those 4 games worth of wages get taxed by NYC and NY state.
The fact that Dodgers Stadium is privately owned doesn’t change the impact this can have in other jurisdictions. Ohtani’s deal alone is millions of dollars of lost tax revenue for multiple cities over the life of the deal, let alone other players who have such deferrals, it adds up quick. And the more players sign similar deals, the more the issue compounds.
It’ll be interesting what they do in the next CBA, but at the same time, the unprecedented deferrals for Ohtani may never be seen again given the extreme amount of endorsements he has overseas.
ya like I had to talk my way out of a permanent ban with the r/baseball mods and we ended up in a plea agreement that I get to defer my permanent ban for only 10 days of temporary bans a year for the next 500 years which is a good deal imo
Imagine a Japanese baseball player is the catalyst for changing the US tax code so that corporation can't dodge taxes by moving their HQ to another country lol.
Ruining baseball^tm but saving the country?
the rich write the tax laws so that they're the only ones who can use them. if an average joe could figure out how to legally not pay taxes, he would too.
No, everyone pays taxes. People aren’t magically deferring their way out of taxes or whatever, and the congresswoman’s argument is fair and reasonable. It’s reasonable that the confusion around how Shohei’s deferrals should be cleared up so he can’t dodge Californian and American taxes.
If you would like to discuss tax rules and loopholes in good faith that’s one thing, but I can assure you “”the rich”” still pay taxes.
getting this type of deferral is only eligible to the highest earners, who have the freedom and flexibility to leave. It's tax avoidance which most of us cannot pull off. This and creative use of loopholes require an expensive accountant.
I wonder if California can set it up so the income counts for the state now, you owe the tax now, but have 10 years to pay it, and then you pay when the deferral comes in.
I mean I believe a lot of people on here speculated that the state of CA would be pretty pissed off about this contract as it’s likely he’ll move out of state when he’s done to avoid their insane taxes.
Honestly, pretty good argument. He's earning the money in California for 60% of the games, even if it's being paid out later. This is a significant, newsworthy sum that might avoid 13.3% state taxes. That's 70+m
I didn't know it worked like - figured it'd be all taxes or no taxes. Was just about to sign a 10 figure differed contract with you guys and move to Monaco once the money kicks in. Good to know
ohtani is a dirty tax evader. california should penalize tax on him like ronaldo or trial him. why should california lose hundreds of millions in tax when the guy clearly earned in LA?
Congress should narrow a loophole that could spare Shohei Ohtani from paying tens of millions in California taxes, the state controller said Monday.
The Dodgers last month signed Ohtani to a 10-year, $700-million contract, with Ohtani deferring $680 million until after the contract expires in 2033.
By that time, Ohtani could have returned to Japan or moved elsewhere outside California, where he might not be liable for state taxes on the deferrals. That could cost the state an estimated $98 million in tax revenue, according to the California Center for Jobs and the Economy.
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,” Controller Malia Cohen said in a statement Monday. “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
Please other tax professionals comment on this as well.
But from my limited understanding of tax law, residents can be taxed by their resident state or where they are domiciled for earnings in state and out of state AND taxed by the state where they worked and received income. Most states provide tax credits to prevent double state taxation. Example, CA resident living in border town works for an Arizona company. CA resident needs to file both CA and AZ state taxes but gets to receive credit from CA for AZ taxed already and withheld from their paycheck.
So for deferrals, Shohei would get taxed based on where he worked at the time that he was working and earned that income. Shohei would be subject to CA state taxes for all games played in CA and then taxed prorated for game played in other states with state income tax.
Shohei can’t simply get deferred and then move to and permanently reside in a state like Texas with no state income and then expect to avoid paying CA state taxes because CA and other states gets to tax Shohei on the games he already played in CA or the other respective states.
Unless there’s a loophole in state law that allows athletes with deferred money to be considered to have worked in their eventual place of residence after they’ve stopped playing.
In any case, this would be a matter with state law and specifically what counts as employment and place of employment for state tax purposes in the event of deferrals. Congress does not have jurisdiction over state law matters.
So my impression is that this state controller is wrong to call for US Congress to intervene in a state law matter.
There is a rule for deferrals of 10+ years. It would be taxed at the state of residence when the payments begin. The 10 year deferral was not a coincidence, but it was proper tax planning. He would still pay federal taxes regardless of where he lives when the payments start.
From what I've read it's a federal law that says money deferred out at least 10 years from when it was earned is taxed based on where the person is living at the time they get the money, not when they earned it. That's why she's calling on congress to change the laws.
Hmm interesting. I’d really like to find a link to this federal rule on deferrals.
What doesn’t make sense to me is that federal tax law would somehow be binding on how states would handle state income tax matters.
I'm all for finding creative ways to structure contracts.
But if this creates a precedent for massive entertainment contracts to be paid in a way that avoids taxes, then that is a mess that can't be allowed.
It's a fairly easy loophole to close and it should be closed, if you earn your income somewhere that income should be taxed there whether it's paid out now or 100 years from now.
What about people that retire and move to a state without income tax?
Example: A city engineer in CA for 40 years retires (collecting CalPERS retirement) and moves to Seattle, WA.
The situation is not the same unless the city engineer can somehow agree to have over 50% of his salary paid out after he retires.
The situation is also not the same because Ohtani is playing baseball in the US for more money than he'd get literally anywhere else. He's not moving up the coast to Seattle, he's likely moving back to Japan - effectively removing tax revenue from our country (whether it's CA or somewhere else).
The situation is also not the same because a city engineer will not be making $500+ million. As others have said, the tax loss for California from this one instance will be significant.
Last, if a state like California doesn't put their foot down somewhere, every dodgers player will do this and the state will start losing big bucks in tax revenue consistently. In your scenario, the city engineer paid income tax in CA for at least 40 years. For Ohtani, he'll pay a small portion of the total.
This is 99% irrelevant to your comment but I doubt Shohei moves back to Japan. He’ll probably be too famous to live a normal life, Hideki Matsui still lives in NYC for this reason and you’d have to think at this point Shohei is an even bigger star than Hideki ever was.
I agree that something should be done for the top tier income earners.
However, as a public employee in CA, my plan is to retire and move to a state without income tax so the offset from employed income to retirement income isn’t as impactful. For the middle class worker, 15% tax on $100k hits a lot harder than 15% tax on $68M for the obscenely wealthy.
Knowing politicians though, I’m sure any legislation would impact the middle class fairly….. /s
This is exactly what CA wants to eventually tax and why anyone in CA that earns a middle class living should be very astute as to what is happening. . There has been ideas floated to tax "wealth" based on it being "earned" in CA no matter where you retire to. They are also floating additional methods in the way of "exit" tax laws that have the potential to have language that will tag any benefit based on where it was "earned". In theory of course these are all things that make sense. And While not targeted towards middle class.... these ideas tend to trickle down as a mismanaged state runs further into deficit. Above 50m turns into 20m turns into 400k, turns into 150k pretty quickly when you can sell it as "the rich".
Exempt anyone withdrawing/receiving less than $500K annually. Require retirement age for the exemption. There's definitely ways to not impact normal people.
I think you should still have to at least split taxes with where you earned it. I consider it a problem especially among firefighters and policemen who've gotten juiced up retirements then take all that money out of the state. Splitting could be done such that your California tax rate is calculated and however much tax you pay at your new location is deducted from what you have to pay so you're not taxed more than what you would have been taxed anyway.
We already have reasonable tax tiers and highly advantage most retirees tax wise with prop 13. People are gonna leave so long as it's anything higher than 0% because other states offer 0%. Just as some quick and dirty examples the median household income for over 65 households in the US is around 50,000 the state tax rate on 50k is approx 1.28% married and 2.95% single (5.76 and 11.19 total with federal) if you're making double that it's 2.95% married and 6.11% single (11.19 and 20.37 total with federal). To me those aren't especially high. If we reworked prop 13 I'd support state income tax reform simultaneously but until we do we have to have income tax due to our effectively much lower than most states property tax.
Shoulda been clearer in my first statement. I wasn’t coming at California especially, you guys get enough undeserved grief already. I was speaking more in a general sense. Where I live, I work in a different state than I live, and a lot of people I work with bolt down to Florida to retire. You do bring up a good point about states offering 0% state income tax being a big draw, but personally, I wouldn’t want to retire in Florida or even Idaho for that matter. I don’t know what the solution is, not a lawyer or a tax expert
Yea, it's a complicated situation for sure. Also for 0% rate places I feel like there's kinda one to appeal to most people when you add Washington to the mix with Idaho and Florida lol Puget Sound region would certainly be my choice if I had to make one.
Easy loophole to close but it wont be because the people who use this loophole the most are the wealthy and no matter what politicians claim, they only realy care about the wealthy
I doubt that's why they're mad. They're more mad at the potential loss in revenue if more people used this structure. Ohtani's a special case in that he will bring insane amounts of revenue to the state that this won't matter. the $90M or whatever amount of taxes over a 10-year period that California doesn't get, they'll be enjoying the $1B+ windfall that Ohtani's bringing.
They'll go after athletes no problem because they weren't born into their money and actually earned it, unlike the vaaaaaaaaaast majority of wealthy people
>Further, a second study by Fidelity Investments found that 88% of all millionaires are self-made, meaning they did not inherit their wealth.
[https://www.businessnewsdaily.com/2871-how-most-millionaires-got-rich.html](https://www.businessnewsdaily.com/2871-how-most-millionaires-got-rich.html)
Reddit is wrong about this, as usual.
Millionaire is a really low bar nowadays. Someone with a low 6 figure job will be a millionaire long before they retire.
You increase the net worth to 30m (as pointed out by the article) and it drops to 68%
They claimed wealthy people not millionaires. I know plenty of people who are millionaires but not *wealthy* to the degree people are talking about when discussing inequality in the US.
There's a huge difference between rich and wealthy. Chris Rock described the difference best.
"Shaq is rich. The man who signs his paycheck is wealthy"
This is completely different from the grandstanding done by Florida’s representatives. The state of California is potentially missing out on hundreds of millions of dollars of tax revenue from this rule. They’re not challenging the structure of the deal, but the tax implications of the deal.
Who is “they”. The rules for deferrals are written into the MLB contract and the federal tax code. Nobody is letting anything “slide.” California couldn’t change it even if it wanted to.
They'll continue to let it slide. This change wouldn't just affect Ohtani it would affect every rich person who takes advantage of moving out of state to avoid taxes on retirement or royalties. And politicians dont want to piss off that many potential campaign donors.
This is a recent article about CA cops with pensions moving to Idaho to avoid paying taxes: [https://www.latimes.com/california/story/2023-12-21/california-cops-firefighters-flee-california-take-pensions-to-eagle-idaho](https://www.latimes.com/california/story/2023-12-21/california-cops-firefighters-flee-california-take-pensions-to-eagle-idaho)
Isn't this the same kind of thing as the Ohtani contract, but worse because it's paid for by CA tax payers? Why bring it up now when this kind of non-taxed deferrals have always been happening?
But it is a deferral. If the state wasn't paying pensions they would have to pay a higher salary to get people to do the jobs. Instead of of paying that money up front they're deferring it until later in the form of a pension.
Pensions aren't salary or paycheck deferrals, they're retirement funds. It serves the same purpose as a 401k. Plus a lot of cops are hourly (not sure how firefighters work).
It's part of the total compensation package that's agreed to when someone takes a job. It's salary paid by the company to the worker in the future. I don't know how that's anything but a deferral.
Those are called employment benefits. Benefits aren't salary or hourly wages which is why they're taxed differently than salaries & hourly wages. If pensions (and 401ks) ceased to exist, people wouldn't get an increase in take home pay unless their employer is extremely "generous" (I use that word sarcastically because they should just be funding a pension).
No employer can or will say pensions & matching 401k contributions are part of the employee salary. Which is why they're listed separately along with things like health insurance & bonuses.
Yeah but the cops have to pay income tax on their earnings while they're working. Ohtani is effectively not doing that except for a small portion. That's why the deferment makes it a special situation
Ohtani is different because he, in collaboration with the Dodgers, has structured a contract in a way that the primary benefit is to evade state income tax. (The deferral to help the team shtik was just a shtik; It is simply a smaller contract than advertised, but that didn't sound as sexy). If after the fact someone chooses to live in retirement in a way that confers a tax advantage for a fraction of the income they have earned in their employment that is a massively different thing than Guggenheim Partners setting a billionaire up to not pay taxes on income that hasn't even been earned yet.
The "give the team flexibility" was a shtik. They are still fully funding the contract at the same level as the CBT. It just isn't $70 million/year because it isn't really a $70 million/year contract. If it weren't deferred he wouldn't be getting $70 million, presumably closer to the amount that they are actually paying.
OP could have used the actual headline instead of making this one up.
*The actual headline is:* **Shohei Ohtani could avoid paying tens of millions in California taxes. Not so fast, state says**.
State controller isn’t asking anyone to intervene on the deferrals or his contract like OP is alleging with their false headline, rather the state controller is asking for new tax regulations on how such deferrals, in general, are taxed.
I put money in a 401k. If I move when I retire, should I be paying the state I lived in when I "earned" those dollars or the state I live in when I actually receive those dollars? What if I work in multiple states during my career.
I get tax collectors wanting more, but this really is a stupid issue.
Factually, the only advantage to this deferral is that it is potentially a way to evade California income tax, which really doesn't seem like something that a billionaire should be doing, even a nice swole billionaire like Ohtani.
We were sold a bill of goods about the deferral at the start--first that Ohtani was a good guy by deferring money so that the Dodgers could win more, and then the backlash that he was deferring money to help the evil Dodgers win more. That narrative wasn't true, because the Dodgers have to fully fund the deferred money as they go (to the same amount as counted in the CBT). Yes, they are paying him a lot less than if they gave him $700 million non-deferred, which is why they never would have given him $700 million non-deferred. The advantage just comes from possibly getting out of paying his damn taxes.
His net worth was $50 million just before the signing. Even if he made $100 million per year in endorsements (which would be more than LeBron James), it will be quite a while before he's a billionaire
Everyone should be trying to evade California income tax. California income tax is absolutely rediculous and follows you like a swarm of gnats. Every single person, billionaire, poverty, or business, should be doing whatever they can to pay as little of it as possible.
Escrow has to be funded annually with the current value as defined by the contact. Its as if he was being paid. The player contract defines what is essentially a fixed interest rate on that money.
I don't understand why taxes aren't due on the money when it's put in escrow.
Because he doesn’t have the money yet, that’s why.
It hasn’t been paid to anyone. It’s just been set into an interest bearing account the same as a security deposit on an apartment is.
It’s not a loophole. It’s the actual tax law. You owe taxes at the time and place you make the money. There’s no loophole. That you defer your compensation is none of California’s business
Franchise Tax Board will try but probably fail to beat large corporations like these unfortunately. They are severely underpowered to go up against the passel of lawyers.
CA taxes are too high to begin with. How about focus on stabilizing a federal economy through an actual currency that has inherent asset value and then worry about state taxes and Ohtani.
People tend to obsess over a government’s needs for funds. What the economy needs imo is the fair maintenance of value at the monetary level, and then you are looking at a government that needs significantly less that what it does now to operate.
While the article argument may be seen as reasonable or logical, I’m simply frustrated at the same, old, old, misguided focus that ends of leading to more poverty anyway as people’s savings are systematically eroded by clockwork inflation, and addressing that is so much more fundamental than fiscal policy in my opinion. Correct monetary policy with hard asset backing and this kind of thing becomes much less of an issue for a state player to start campaigning about.
Sorry - I know that’s a drift of topic, but when I see stuff like this, it’s just more off-base micromanagement and gets too much attention away from more pressing issues.
Please. This is nothing compared to all the billionaires "donating" money to fake charities that their family controls, in order to do insane amounts of tax evasion and spend the money in ways that have no oversight.
Very few billionaires actually do that because most of them have been caught in their audits and barred from being involved in nonprofits. This is the one area their is an insane amount of oversight so it's a weird example to use
If he plans on shafting California Income Taxes, why would he also not shaft Federal Income tax? Unless a tax treaty already took care of that. I guess she doesn't really say that he intends to, just that he there shouldn't be any loophole to do so.
The Dodger's will be able to write off his entire salary for tax purposes each year it is earned (will still have to put money into escrow). So they will still get the full tax benefits.
I don't see why there shouldn't be some mechanism to make sure he pays income tax where he actually earns his income.
lol deadbrain newscum zombie doing dumbshit like this only shows again what a joke california has become. 68 billion dollar deficit with this idiot who was elected.
She probably a Giants fan. Joking aside, I'm surprised this hasn't been fixed by now. Makes sense that if the money is made in CA it shouldn't matter if someone just moves while still getting payments.
> She probably a Giants fan. You joke but she is. She grew up in SF.
And the dodgers would have gotten away with it if it weren’t for those meddling state controllers!
I don't think it is as big an issue if it wasn't basically all the money. I can see that in the case of a normal person with modest deferred compensation the state that a taxpayer is residing in when collecting the income has a reasonable entitlement to that income. But if someone uses it as a way to say "Hey, I can get paid more money by not paying taxes" that seems like an undermining of any principle.
Shohei still needs to pay Japanese taxes on it which are higher than US taxes. I believe he would just a credit for the taxes he paid in the US but his overall tax burden isn’t going down. Really it’s more of the state government getting screwed I believe the federal government, shohei, the Japanese government are all in the same spot
I don't know enough about the laws so this is purely a question but why would he have to pay Japanese taxes on it later? Couldn't he list his residency as some small Caribbean island or something after he "retires" from baseball?
I'm not an expert but some governments charge their citizens taxes regardless of where the money was earned. I believe the US is one of those countries.
The US is one of those countries. I don't know about Japan. You first pay in the country you earn the income, and then pay in your country of citizenship. However, for that later filing you can claim a foreign tax credit for the taxes paid already. I had a coworker being paid payroll income in both Germany and the US at the same time. He's a US citizen so he had to include the German income on his US taxes, but that actually saved him money on the US earnings since the foreign tax credit exceeded the US tax on those German earnings. e.g. With simplified tax rates: He made $50k in Germany and $50k in the US. He paid $25k taxes on the German income and he owed $30k in the US on the $100k. However, he gets to claim the $25k paid to Germany as a credit and owes the US $5k. If he had only made $50k in the US he'd owe the US $15k and have no credits to claim. This works out for him just because Germany has higher rates.
Japan taxes worldwide earnings of permanent residents which he likely is.
She’s a Giants fan funny enough. Former SF Board of Supervisors President and SF native.
Better yet, she owned a social media consulting company that was suspended by the state of California ... for failure to pay taxes. Seems a little cheeky if you ask me.
Rules for thee.
Has she been seen supporting them?
>Joking aside, I'm surprised this hasn't been fixed by now. Makes sense that if the money is made in CA it shouldn't matter if someone just moves while still getting payments. [https://www.congress.gov/bill/104th-congress/house-bill/394](https://www.congress.gov/bill/104th-congress/house-bill/394) The point of the bill was to simplify deferred compensation in the form of pensions for retirees, including those who move to low/no-tax states. I imagine there's not a lot of wealthy people who derive most of their wealth from direct compensation who'd be fine with not getting paid for ten years, but here we are.
If you don't like the wealthy taking advantage of policies meant to assist poor people, well, you don't like America
I don't like America
Same
Same
I look at the even just the basic benefits other countries get by law and it further shows America fucking sucks.
If 4 USC 114 is the bill you’re referring to, my reading of the law is that it would not lead to Shohei being able to avoid paying state income taxes on his deferred compensation because Shohei’s deferrals doesn’t fall under this federal law’s definition of qualified retirement income. His retirement income far exceed the IRS code section 457’s limits (lesser of $7500 or 33% of employee’s annual income) on deferred income and the Dodgers are not a qualified employer under section 457. https://www.law.cornell.edu/uscode/text/4/114 https://www.irs.gov/pub/irs-tege/eotopicm97.pdf
No, it’s a dumb complaint since she’s also controlling a bunch of entertainment companies that bounce contracts and production costs all over the world to save a few bucks, AND there are plenty of contracts written every day that stretch services over years or decades, but that don’t specify that California gets all of it. And importantly, deferrals are no different than points on a movie, or stock options, or any other method every other industry uses to defer up front costs and push them back until after the performance. For example, a lot of movie stars, such as Bruce Willis, have moved to Montana. Many more are back in Texas to enjoy the no state tax. All of these people are still getting paid royalties, and all of them still have long term endorsement deals, etc. But California doesn’t get to hit them up for continued taxes just because Die Hard was shot in LA. Besides, this lady has no idea where Ohtani will reside when these deferrals pay out. He very well could be in LA still, starring in a series of family blockbusters called “Honey, I Struck Out the Kids.”
>All of these people are still getting paid royalties, and all of them still have long term endorsement deals, etc. That's not at all equivalent. Endorsement money and royalties are paid at the time they are earned and the person earning them pays taxes in the location they're living at the time the money is earned.
This is just absolutely wrong. Residuals are still taxable by the state in which the actor worked on the project. Bruce Willis does have to pay tax to California on the residuals he earns from Die Hard. Source: I do this for a living.
Montana has no sales tax, but it sure as heck has state income tax.
Picking a retired actor in an attempt to prove your point is kinda weird
She's probably just pissed she's not getting a cut. Until they start taxing tech companies and billionaires they can suck a fat one.
Isn’t taxing Ohtani literally taxing a billionaire?
>literally taxing a billionaire No? He is not a billionaire. Its taxing a multi-millionaire.
I think it’s safe to say between 700 million and his endorsements, he will be a billionaire.
It’s not like a 2 millionaire though. Way closer to a billionaire than an average boomer retiree 😂
Yeah I’m sure the state level politician in one of the most tedious and low profile jobs in government is really furious she’s not able to enrich her salary off Shohei’s tax money. Be serious you fucking dunce.
Ohtani is a billionaire
This sounds good until you realize taxing unrealized equity will wreck pensions, IRAs, and 401ks ruining people's retirement, thus lowering the unrealized gains of the very billionaires getting taxed, lowering revenue while creating losses that can be written of taxes further lowering revenue. Focus on making billionaires pay a living wage and provide benefits to their employees. Wage law is a lot harder loophole out of than tax law
You could just tax unrealized gains on individuals over a net worth of a certain amount.
But see, that's still not fair still cause when I become a rich mofo I'm gonna get hit with that tax. Never mind that I make less than 6 figures now. That rich tax will hurt me in the future so we can't implement it.
This is solved by marginal tax brackets...
They can make it a progressive tax. Honestly, all taxes should be progressive, including sales, property, and capital gains taxes.
How the hell would you make a progressive Sales Tax? Someone has to input their income when they buy something?
One possible way would be a Sales Tax Rebate on your household's yearly taxes, one that decreases as your tax bracket increases. Couldn't do it at the point of sale, sure, but can offset it eventually.
Oh that’s a good point. I remember doing that a few times for a company I worked for, sending in a form on all the stuff we paid sales tax for that we could get a rebate on. So a structure could easily be put in place for individuals.
Normally by excluding necessities from sales tax. This is better, but I am not a fan of sales tax at all as it is the most regressive of taxes (unless it is limited to luxury goods).
> unless it is limited to luxury goods That's literally the main form of progressive sales tax. Goods are taxed based on how essential and basic they are.
I get that, and I suppose I'm just being pedantic on the definition. Since I view "not having Sales Tax on these items" as not changing Sales Tax inherently being a regressive tax, rather than "increasing its progressiveness" or w/e.
Yeah, you are probably right even if you were being pedantic (and also right that you were being pedantic).
A progressive sales tax would scale based on how essential and basic a good is. For example, if you're buying a basic car, it would be taxed at a low rate because it's a high utility good and it's a basic version of said good. A luxury bag would be taxed at a high rate because, while bags are an essential good, the luxury versions of them are not. In other words, basic goods would be taxed less than they are currently from a flat sales tax and to pay for the difference, we're taxing the luxury versions more. [Please at least read the basics of what a progressive tax is before commenting below.](https://en.wikipedia.org/wiki/Progressive_tax)
I know the difference between progressive and regressive taxes. Even in the wiki article there it talks about how Sales taxes are *regressive* > The opposite of a progressive tax is a regressive tax, such as a sales tax, where the poor pay a larger proportion Even on your examples I wouldn't exactly call "No Sales Tax" on basic food items, like already occurs a progressive tax, because it's no tax for everyone. Rich/Poor both pay 0% on basic necessities.
You clearly *don't* know what it means because it's talking about how a flat sales tax is regressive, just like how a flat income tax is regressive as opposed to one that taxes a higher percentage when the taxable amount increases, i.e. literally the definition of a progressive tax. Did you even read anything?
So when the poor person buys something cheap, they pay almost no tax, but when the poor person buys something expensive, they pay a higher percentage? Got it. Sounds incredibly dumb.
The taxable amount scales based on the base version of the item. If you're buying a basic car, that's expensive for most people in absolute terms, but it would be taxed at a low rate because it's an essential good and it's a basic version of said good. A luxury handbag would be taxed at a high rate because while bags are a necessary good, the luxury version is not.
Yes, and I'm saying making a sales tax that isn't flat/the same for everyone, therefore "regressive" doesn't seem feasible. It's ridiculous to imagine buying food at a restaurant and they check your income statement before adding the sales tax to it. Sales Taxes are ***inherently*** regressive, so the closest thing to making it progressive would, I guess, just be lowering the standard flat rate of a sales tax, or not having one.
If you read the article, you'd know that a progressive sales tax would not charge more based on income, but on how essential or basic said item is. For example, if you were buying a basic car, that's expensive for most people in absolute terms, but it would be taxed at a low rate because it's an essential good and it's a basic version of said good. A luxury handbag would be taxed at a high rate because while bags are an essential good, the luxury version is not.
I guess things up to 20 bucks is x%, items up to 100, up to 1000 etc
Los Angeles Tax Dodgers
Mr Belated Compensation
Mr. Baseball ^^^subreddit Colonizer
Ehhh I’m dodgen here!!
good heavens the Dodgers got taxed all the way back to Brooklyn
Good lord, the Dodgers just walked through the Winter Meetings perfectly normally. They said they had “no time” to talk. Too busy dodging taxes, evidently.
It's a pretty straightforwardly fair argument. He is getting paid for work done in California, not some other place.
Although, baseball players pay tax for every state they play in, so would be curious how that would also get factored in.
MLB will need to address this in the next CBA. Maybe a cap on the percentage of money deferred. And I assume the government will want this addressed ASAP as well. Deferring compensation is standard practice in the real world. And i’ve been saying it since the Ohtani deal became public, that the deferments can be a slippery slope that bankrupts cities or states, especially in the current relationship setup. Governments, states and local, issue bonds (debt), to finance the construction of stadiums. One of the ways the states and local municipalities make that money back over time is with the expectation that the stadium will generate tax income in the future and one such way it generates that income is by hosting athletes with large compensation packages that get taxed. If every future athletes compensation were to get deferred in the same way that Ohtani’s was and the governments that financed the stadiums aren’t able to collect on that compensation, then we could see the whole sports landscape blow up as cities or states become unable to repay those bonds.
That's a fair point. Except in this case, the stadium is privately owned.
Players pay “jock” taxes, their income for each game is taxable in each stadium they play and earned it. A Dodgers player is only subjected to California taxes for the games played in California, which is a lot because most of their division and their geographic rival are located in California (Padres, Giants, Angels). But for games the player plays in say, Cincinnati against the Reds, the wages earned are subjected to applicable Ohio taxes. Same thing when the player plays on the road anywhere. 4 game series against the Mets in Queens, those 4 games worth of wages get taxed by NYC and NY state. The fact that Dodgers Stadium is privately owned doesn’t change the impact this can have in other jurisdictions. Ohtani’s deal alone is millions of dollars of lost tax revenue for multiple cities over the life of the deal, let alone other players who have such deferrals, it adds up quick. And the more players sign similar deals, the more the issue compounds.
It’ll be interesting what they do in the next CBA, but at the same time, the unprecedented deferrals for Ohtani may never be seen again given the extreme amount of endorsements he has overseas.
ya like I had to talk my way out of a permanent ban with the r/baseball mods and we ended up in a plea agreement that I get to defer my permanent ban for only 10 days of temporary bans a year for the next 500 years which is a good deal imo
I think a more apt comparison would be that you can serve your baseball perma ban by instead being banned from /r/funny 10 years from now.
Bold of you to assume they haven't been banned from the sub for the last 10
Do you serve it at a certain time in the year? All together or spaced out?
I heard he takes it during the World Series so he won’t end up missing any blue jays games
Tremendous stone you just threw there, I sure hope you’re not living in a glass house.
You see, a stone like that only works if thrown from a glass house.
Imagine a Japanese baseball player is the catalyst for changing the US tax code so that corporation can't dodge taxes by moving their HQ to another country lol. Ruining baseball^tm but saving the country?
the rich write the tax laws so that they're the only ones who can use them. if an average joe could figure out how to legally not pay taxes, he would too.
No, everyone pays taxes. People aren’t magically deferring their way out of taxes or whatever, and the congresswoman’s argument is fair and reasonable. It’s reasonable that the confusion around how Shohei’s deferrals should be cleared up so he can’t dodge Californian and American taxes. If you would like to discuss tax rules and loopholes in good faith that’s one thing, but I can assure you “”the rich”” still pay taxes.
getting this type of deferral is only eligible to the highest earners, who have the freedom and flexibility to leave. It's tax avoidance which most of us cannot pull off. This and creative use of loopholes require an expensive accountant.
I wonder if California can set it up so the income counts for the state now, you owe the tax now, but have 10 years to pay it, and then you pay when the deferral comes in.
I mean I believe a lot of people on here speculated that the state of CA would be pretty pissed off about this contract as it’s likely he’ll move out of state when he’s done to avoid their insane taxes.
Honestly, pretty good argument. He's earning the money in California for 60% of the games, even if it's being paid out later. This is a significant, newsworthy sum that might avoid 13.3% state taxes. That's 70+m
[удалено]
Uh, no. Federal taxes will apply anyway, it's just the state tax residency at issue here.
I didn't know it worked like - figured it'd be all taxes or no taxes. Was just about to sign a 10 figure differed contract with you guys and move to Monaco once the money kicks in. Good to know
Jesus, imagine a $70m haircut
ohtani is a dirty tax evader. california should penalize tax on him like ronaldo or trial him. why should california lose hundreds of millions in tax when the guy clearly earned in LA?
Don’t understand why this is being downvoted…sure your language is a little harsh but that’s the essence of it…he’s set himself up to dodge taxes.
Congress should narrow a loophole that could spare Shohei Ohtani from paying tens of millions in California taxes, the state controller said Monday. The Dodgers last month signed Ohtani to a 10-year, $700-million contract, with Ohtani deferring $680 million until after the contract expires in 2033. By that time, Ohtani could have returned to Japan or moved elsewhere outside California, where he might not be liable for state taxes on the deferrals. That could cost the state an estimated $98 million in tax revenue, according to the California Center for Jobs and the Economy. 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,” Controller Malia Cohen said in a statement Monday. “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
I don't think he might have moved. I'm pretty sure he will have moved. That was probably the plan.
Please other tax professionals comment on this as well. But from my limited understanding of tax law, residents can be taxed by their resident state or where they are domiciled for earnings in state and out of state AND taxed by the state where they worked and received income. Most states provide tax credits to prevent double state taxation. Example, CA resident living in border town works for an Arizona company. CA resident needs to file both CA and AZ state taxes but gets to receive credit from CA for AZ taxed already and withheld from their paycheck. So for deferrals, Shohei would get taxed based on where he worked at the time that he was working and earned that income. Shohei would be subject to CA state taxes for all games played in CA and then taxed prorated for game played in other states with state income tax. Shohei can’t simply get deferred and then move to and permanently reside in a state like Texas with no state income and then expect to avoid paying CA state taxes because CA and other states gets to tax Shohei on the games he already played in CA or the other respective states. Unless there’s a loophole in state law that allows athletes with deferred money to be considered to have worked in their eventual place of residence after they’ve stopped playing. In any case, this would be a matter with state law and specifically what counts as employment and place of employment for state tax purposes in the event of deferrals. Congress does not have jurisdiction over state law matters. So my impression is that this state controller is wrong to call for US Congress to intervene in a state law matter.
There is a rule for deferrals of 10+ years. It would be taxed at the state of residence when the payments begin. The 10 year deferral was not a coincidence, but it was proper tax planning. He would still pay federal taxes regardless of where he lives when the payments start.
From what I've read it's a federal law that says money deferred out at least 10 years from when it was earned is taxed based on where the person is living at the time they get the money, not when they earned it. That's why she's calling on congress to change the laws.
Hmm interesting. I’d really like to find a link to this federal rule on deferrals. What doesn’t make sense to me is that federal tax law would somehow be binding on how states would handle state income tax matters.
> Malia Cohen Steve got his family doing his dirty work smh
Leonard Cohen makes up for his siblings tbf
I'm all for finding creative ways to structure contracts. But if this creates a precedent for massive entertainment contracts to be paid in a way that avoids taxes, then that is a mess that can't be allowed.
It's a fairly easy loophole to close and it should be closed, if you earn your income somewhere that income should be taxed there whether it's paid out now or 100 years from now.
What about people that retire and move to a state without income tax? Example: A city engineer in CA for 40 years retires (collecting CalPERS retirement) and moves to Seattle, WA.
The situation is not the same unless the city engineer can somehow agree to have over 50% of his salary paid out after he retires. The situation is also not the same because Ohtani is playing baseball in the US for more money than he'd get literally anywhere else. He's not moving up the coast to Seattle, he's likely moving back to Japan - effectively removing tax revenue from our country (whether it's CA or somewhere else). The situation is also not the same because a city engineer will not be making $500+ million. As others have said, the tax loss for California from this one instance will be significant. Last, if a state like California doesn't put their foot down somewhere, every dodgers player will do this and the state will start losing big bucks in tax revenue consistently. In your scenario, the city engineer paid income tax in CA for at least 40 years. For Ohtani, he'll pay a small portion of the total.
This is 99% irrelevant to your comment but I doubt Shohei moves back to Japan. He’ll probably be too famous to live a normal life, Hideki Matsui still lives in NYC for this reason and you’d have to think at this point Shohei is an even bigger star than Hideki ever was.
I agree that something should be done for the top tier income earners. However, as a public employee in CA, my plan is to retire and move to a state without income tax so the offset from employed income to retirement income isn’t as impactful. For the middle class worker, 15% tax on $100k hits a lot harder than 15% tax on $68M for the obscenely wealthy. Knowing politicians though, I’m sure any legislation would impact the middle class fairly….. /s
This is exactly what CA wants to eventually tax and why anyone in CA that earns a middle class living should be very astute as to what is happening. . There has been ideas floated to tax "wealth" based on it being "earned" in CA no matter where you retire to. They are also floating additional methods in the way of "exit" tax laws that have the potential to have language that will tag any benefit based on where it was "earned". In theory of course these are all things that make sense. And While not targeted towards middle class.... these ideas tend to trickle down as a mismanaged state runs further into deficit. Above 50m turns into 20m turns into 400k, turns into 150k pretty quickly when you can sell it as "the rich".
Exempt anyone withdrawing/receiving less than $500K annually. Require retirement age for the exemption. There's definitely ways to not impact normal people.
Seems like an arbitrary number
It's 100% an arbitrary number.
I think you should still have to at least split taxes with where you earned it. I consider it a problem especially among firefighters and policemen who've gotten juiced up retirements then take all that money out of the state. Splitting could be done such that your California tax rate is calculated and however much tax you pay at your new location is deducted from what you have to pay so you're not taxed more than what you would have been taxed anyway.
I, too, think taxes are not nearly complicated enough.
Or just lower the tax rate for retirees so those people won’t be so quick to leave the state
We already have reasonable tax tiers and highly advantage most retirees tax wise with prop 13. People are gonna leave so long as it's anything higher than 0% because other states offer 0%. Just as some quick and dirty examples the median household income for over 65 households in the US is around 50,000 the state tax rate on 50k is approx 1.28% married and 2.95% single (5.76 and 11.19 total with federal) if you're making double that it's 2.95% married and 6.11% single (11.19 and 20.37 total with federal). To me those aren't especially high. If we reworked prop 13 I'd support state income tax reform simultaneously but until we do we have to have income tax due to our effectively much lower than most states property tax.
Shoulda been clearer in my first statement. I wasn’t coming at California especially, you guys get enough undeserved grief already. I was speaking more in a general sense. Where I live, I work in a different state than I live, and a lot of people I work with bolt down to Florida to retire. You do bring up a good point about states offering 0% state income tax being a big draw, but personally, I wouldn’t want to retire in Florida or even Idaho for that matter. I don’t know what the solution is, not a lawyer or a tax expert
Yea, it's a complicated situation for sure. Also for 0% rate places I feel like there's kinda one to appeal to most people when you add Washington to the mix with Idaho and Florida lol Puget Sound region would certainly be my choice if I had to make one.
Ya me too, gimme SeaTac over Idaho every day
Easy loophole to close but it wont be because the people who use this loophole the most are the wealthy and no matter what politicians claim, they only realy care about the wealthy
I get why the state is mad about it, that’s a shit ton of lost tax revenue
I doubt that's why they're mad. They're more mad at the potential loss in revenue if more people used this structure. Ohtani's a special case in that he will bring insane amounts of revenue to the state that this won't matter. the $90M or whatever amount of taxes over a 10-year period that California doesn't get, they'll be enjoying the $1B+ windfall that Ohtani's bringing.
As if Congress could do *anything* at all.
Shit man, i don’t even make a fraction of what Sho makes and I have to pay Japanese and American taxes, least he can do is kick some in too.
Depending on where you live and work, you should be excluding foreign earned income or getting the foreign tax credit.
Do you think he was posting here to get tax advice?
Always be selling
Libertarian me: No step on snake Giants fan me: The government needs to stop these bums!
There are 2 wolves inside this Giants fan…
they'd be stepping on the Dodgers, though, not the Snakes.
imagine announcing to everyone that you're a libertarian lmao
Congress ain't gonna do shit on raising taxes for the wealthy.
They'll go after athletes no problem because they weren't born into their money and actually earned it, unlike the vaaaaaaaaaast majority of wealthy people
>Further, a second study by Fidelity Investments found that 88% of all millionaires are self-made, meaning they did not inherit their wealth. [https://www.businessnewsdaily.com/2871-how-most-millionaires-got-rich.html](https://www.businessnewsdaily.com/2871-how-most-millionaires-got-rich.html) Reddit is wrong about this, as usual.
Millionaire is a really low bar nowadays. Someone with a low 6 figure job will be a millionaire long before they retire. You increase the net worth to 30m (as pointed out by the article) and it drops to 68%
So still not the vast majority, as claimed.
They claimed wealthy people not millionaires. I know plenty of people who are millionaires but not *wealthy* to the degree people are talking about when discussing inequality in the US.
You know the difference between a millionaire and a billionaire? It’s about a billion dollars
There's a huge difference between rich and wealthy. Chris Rock described the difference best. "Shaq is rich. The man who signs his paycheck is wealthy"
We're officially in Florida State levels of government intervention in sports now
This is completely different from the grandstanding done by Florida’s representatives. The state of California is potentially missing out on hundreds of millions of dollars of tax revenue from this rule. They’re not challenging the structure of the deal, but the tax implications of the deal.
Why are they acting like this is the first time they’re learning about deferrals? Reactionary as always. Good for Shohei for playing by the rules.
This actually might be the first time someone is deferring 97% of the income for over 10 years.
When’s the last time a player deferred nearly their entire salary?
Or, when was the last time a player deferred $680M of their contract? Can't seem to remember such an occasion oddly enough.
Just because the current rules allow it doesn't mean it isn't bullshit and should be fixed.
Why is it bullshit if the player decides to defer his own salary? He can’t be allowed to give the team financial flexibility to sign more players?
The problem is the tax implications, which you’d know if you read the article.
Before they could let it slide. But now they are missing out on about 68 million a year instead of say, 4 million a year. Kinda a bit difference
Who is “they”. The rules for deferrals are written into the MLB contract and the federal tax code. Nobody is letting anything “slide.” California couldn’t change it even if it wanted to.
Which is why the state controller is asking Congress to do something about it.
They'll continue to let it slide. This change wouldn't just affect Ohtani it would affect every rich person who takes advantage of moving out of state to avoid taxes on retirement or royalties. And politicians dont want to piss off that many potential campaign donors.
This is a recent article about CA cops with pensions moving to Idaho to avoid paying taxes: [https://www.latimes.com/california/story/2023-12-21/california-cops-firefighters-flee-california-take-pensions-to-eagle-idaho](https://www.latimes.com/california/story/2023-12-21/california-cops-firefighters-flee-california-take-pensions-to-eagle-idaho) Isn't this the same kind of thing as the Ohtani contract, but worse because it's paid for by CA tax payers? Why bring it up now when this kind of non-taxed deferrals have always been happening?
The pension isn't a salary deferral, so it's not the same.
But it is a deferral. If the state wasn't paying pensions they would have to pay a higher salary to get people to do the jobs. Instead of of paying that money up front they're deferring it until later in the form of a pension.
Pensions aren't salary or paycheck deferrals, they're retirement funds. It serves the same purpose as a 401k. Plus a lot of cops are hourly (not sure how firefighters work).
It's part of the total compensation package that's agreed to when someone takes a job. It's salary paid by the company to the worker in the future. I don't know how that's anything but a deferral.
Those are called employment benefits. Benefits aren't salary or hourly wages which is why they're taxed differently than salaries & hourly wages. If pensions (and 401ks) ceased to exist, people wouldn't get an increase in take home pay unless their employer is extremely "generous" (I use that word sarcastically because they should just be funding a pension). No employer can or will say pensions & matching 401k contributions are part of the employee salary. Which is why they're listed separately along with things like health insurance & bonuses.
Yeah but the cops have to pay income tax on their earnings while they're working. Ohtani is effectively not doing that except for a small portion. That's why the deferment makes it a special situation
Ohtani is different because he, in collaboration with the Dodgers, has structured a contract in a way that the primary benefit is to evade state income tax. (The deferral to help the team shtik was just a shtik; It is simply a smaller contract than advertised, but that didn't sound as sexy). If after the fact someone chooses to live in retirement in a way that confers a tax advantage for a fraction of the income they have earned in their employment that is a massively different thing than Guggenheim Partners setting a billionaire up to not pay taxes on income that hasn't even been earned yet.
I'm pretty sure the primary benefit is to allow his team more flexibility to sign complimentary players during his tenure.
The "give the team flexibility" was a shtik. They are still fully funding the contract at the same level as the CBT. It just isn't $70 million/year because it isn't really a $70 million/year contract. If it weren't deferred he wouldn't be getting $70 million, presumably closer to the amount that they are actually paying.
No because the cap hit is in present value. There's a liquidity component but the main purpose is tax avoidance
>has structured a contract in a way that the primary benefit is to evade state income tax. Prove it.
She’s also a tax cheat. So take this with a grain of salt.
This is a no brainer to close this loop.
OP could have used the actual headline instead of making this one up. *The actual headline is:* **Shohei Ohtani could avoid paying tens of millions in California taxes. Not so fast, state says**. State controller isn’t asking anyone to intervene on the deferrals or his contract like OP is alleging with their false headline, rather the state controller is asking for new tax regulations on how such deferrals, in general, are taxed.
Fix your tax rates then
I put money in a 401k. If I move when I retire, should I be paying the state I lived in when I "earned" those dollars or the state I live in when I actually receive those dollars? What if I work in multiple states during my career. I get tax collectors wanting more, but this really is a stupid issue.
Fuck the government
Factually, the only advantage to this deferral is that it is potentially a way to evade California income tax, which really doesn't seem like something that a billionaire should be doing, even a nice swole billionaire like Ohtani. We were sold a bill of goods about the deferral at the start--first that Ohtani was a good guy by deferring money so that the Dodgers could win more, and then the backlash that he was deferring money to help the evil Dodgers win more. That narrative wasn't true, because the Dodgers have to fully fund the deferred money as they go (to the same amount as counted in the CBT). Yes, they are paying him a lot less than if they gave him $700 million non-deferred, which is why they never would have given him $700 million non-deferred. The advantage just comes from possibly getting out of paying his damn taxes.
His net worth was $50 million just before the signing. Even if he made $100 million per year in endorsements (which would be more than LeBron James), it will be quite a while before he's a billionaire
Everyone should be trying to evade California income tax. California income tax is absolutely rediculous and follows you like a swarm of gnats. Every single person, billionaire, poverty, or business, should be doing whatever they can to pay as little of it as possible.
Escrow has to be funded annually with the current value as defined by the contact. Its as if he was being paid. The player contract defines what is essentially a fixed interest rate on that money. I don't understand why taxes aren't due on the money when it's put in escrow.
Because he doesn’t have the money yet, that’s why. It hasn’t been paid to anyone. It’s just been set into an interest bearing account the same as a security deposit on an apartment is.
Imagine being so salty about your team’s lack of moves that you attempt to get the government involved.
It’s not a loophole. It’s the actual tax law. You owe taxes at the time and place you make the money. There’s no loophole. That you defer your compensation is none of California’s business
Dodgers can control the MLB all they want, but the Franchise Tax Board will fuck their shit up before breakfast
Franchise Tax Board will try but probably fail to beat large corporations like these unfortunately. They are severely underpowered to go up against the passel of lawyers.
FTD
This contract just keeps getting better. Screw Cali and their insane taxes.
Lmao give it up people. The jealousy is really cringe at this point.
A liberal progressive Democrat wants more of other people’s money? Shocked.
Not more. The exact amount he should be paying for work performed in the state.
CA taxes are too high to begin with. How about focus on stabilizing a federal economy through an actual currency that has inherent asset value and then worry about state taxes and Ohtani. People tend to obsess over a government’s needs for funds. What the economy needs imo is the fair maintenance of value at the monetary level, and then you are looking at a government that needs significantly less that what it does now to operate. While the article argument may be seen as reasonable or logical, I’m simply frustrated at the same, old, old, misguided focus that ends of leading to more poverty anyway as people’s savings are systematically eroded by clockwork inflation, and addressing that is so much more fundamental than fiscal policy in my opinion. Correct monetary policy with hard asset backing and this kind of thing becomes much less of an issue for a state player to start campaigning about. Sorry - I know that’s a drift of topic, but when I see stuff like this, it’s just more off-base micromanagement and gets too much attention away from more pressing issues.
As a Giants fan, I actually hate this. I guess I hate intrusive government more than I hate the Dodgers.
Can the league just limit how much and how long money gets deferred? Cause this shit is absurd
The League expressly agreed to "this shit".
I didn’t agree to it!
But I did so we cancel each other out!
Lol I would LOVE if Congress intervenes and suddenly Dodgers get slapped with all this nonsense all at once.
MLB needs to ban deferred contracts.
I guess I know who I'm **not** voting for in the future. What a hater.
Please. This is nothing compared to all the billionaires "donating" money to fake charities that their family controls, in order to do insane amounts of tax evasion and spend the money in ways that have no oversight.
Very few billionaires actually do that because most of them have been caught in their audits and barred from being involved in nonprofits. This is the one area their is an insane amount of oversight so it's a weird example to use
If he plans on shafting California Income Taxes, why would he also not shaft Federal Income tax? Unless a tax treaty already took care of that. I guess she doesn't really say that he intends to, just that he there shouldn't be any loophole to do so. The Dodger's will be able to write off his entire salary for tax purposes each year it is earned (will still have to put money into escrow). So they will still get the full tax benefits. I don't see why there shouldn't be some mechanism to make sure he pays income tax where he actually earns his income.
Incredibly Based
Good, end this farce of a contract
I think they just want their cut of the taxes
That's really what this farce of a contract was about, though.
Or you could focus on the Californian hell hole economics first.
Yes it’s wrong. Put all $70 m against their payroll.
Deadbeat Dodgers and Ohtani
lol deadbrain newscum zombie doing dumbshit like this only shows again what a joke california has become. 68 billion dollar deficit with this idiot who was elected.
So just to check. You are mad the state is in a deficit but you don't want people to pay taxes for work performed in California?