MLB Shohei Ohtani’s ten year $700m contract with LA includes $680m in deferred money

[Spydey629]

Money is not a tangible asset, 680 million could be worth very little in 10 years. Nothing is guaranteed.

He has no way to predict what taxes will be like in ten years in California or other states, it could be much higher.
Inflation has basically doubled in the last 10 years.
The USA debt, decline. Impossible to tell what 680 million will be worth in 10 years.

then why don’t all other players do this? I studied economics. I think I know what I’m talking about.

That 68 million (minus the taxes) will earn 5% in dividends + capital gains. Compounding annually. That is usually a 10% return.

It’s a bad decision that doesn’t make financial sense.

My MBA says you’re assuming an awful lot here, especially since you’re only mentioning the taxes, instead of actually calculating California’s astronomical taxes into the equation. Much less assuming a 10% ROI.

 

[awfulwaffle]

Don't Betts and Freeman have the same kind of structure with a deferred amount built into their contract? I don't think this is isolated to Ohtani on the Dodgers. I know there are plenty of other players that have deferred contracts(bobby bonilla day anyone?). This is an insane amount deferred though.

I'm not sure how it works, but it seems as though the AAV is lower than the per year amount it would have been if none was deferred, so the luxury tax would in effect be less than it would have been? This also frees up money to allow more money to be spent on other free agents, which is just more money for baseball players in general.

I don't know about the owners, but obviously the Dodgers wouldn't vote in favor of a change on this rule, and I'm betting other big market teams won't be willing to do the same either.

I"m wondering if this might be something that will always be allowed. It's just eye popping to the amount that is being deferred. Good for him though.

 

[Tkachuk Norris]

My MBA says you’re assuming an awful lot here, especially since you’re only mentioning the taxes, instead of actually calculating California’s astronomical taxes into the equation. Much less assuming a 10% ROI.

can you read?

My argument is actually that Shohei is assuming relative stability. Again money is imaginary. He has no way to determine what 680 will be worth. He is the one making assumptions. I’m saying he should have taken the money and turned it into tangible assets. Or do you not understand that with your MBA?

If he got paid his money and bought tangible investments a 10% annual ROI over a ten year period is conservative.

 

[BigBadBruins7708]

can you read?

My argument is actually that Shohei is assuming relative stability. Again money is imaginary. He has no way to determine what 680 will be worth. He is the one making assumptions. I’m saying he should have taken the money and turned it into tangible assets. Or do you not understand that with your MBA?

If he got paid his money and bought tangible investments a 10% annual ROI over a ten year period is conservative.

And that 10% is lower than just what he saves on California (and likely Federal) tax by deferring.

 

[GaboriklessWild]

Accountable to no one? The commissioners of all four major leagues have been called to testify in front of Congress more than once - the steroid scandal comes to mind immediately.

And Baseball is beholden to the whims of Congress due to being the only sport with an antitrust exemption.

FIFA is probably the most corrupt quasi-governmental organization on the planet. To say it will get worse in the US is just plain ignorance.

Lmao. The US Congress is the most corrupt and criminal organization in the world.

If there was really a doping scandal, why are USADA and WADA not allowed to test?

 

[tucker3434]

It's because FIFA is being held accountable, as it literally involves every country on Earth.

North American sports leagues are accountable to no one. Especially not from governments like FIFA. A) a significant majority of sports team owners are involved in politics. They bankroll one of the two parties, aka oligarchs. B) I'm not familiar with any North American sports leagues other than the NHL. But like the NHL it is used by the government as a propaganda tool aka jingoism as required military nights and players must wear military style jerseys + many NHL games start like a third world military parade.

Another thing is lack of free press. It is hard to take leagues seriously where there is no legitimate independent anti-doping control. It does not follow the WADA code and does not allow USADA or WADA to test. I have yet to see an NHL journalist criticising the NHL's anti-doping efforts. Probably because that person would immediately lose his/her accreditation.

Like for example there's the case of Boogaard, he even failed the lame NHL doping test several times, nothing happened. NHL team doctors gave him extremely strong painkillers like they were candy. If this happened in Europe then many people would have gone to prison for many years. NHL has quite a lot of skeletons in the closet; deaths, suicides, brain injuries, addictions... But you don't see any 'journalist' holding the NHL accountable. Everyone's like, let's move on there's nothing to see here.

Right. None of the North American leagues get caught up in bribery scandals once per decade only because nobody is looking hard enough. Bettman has the entire North American media under his thumb… somehow…

What a pile of xenophobic nonsense.

 

[tucker3434]

Money is not a tangible asset, 680 million could be worth very little in 10 years. Nothing is guaranteed.

He has no way to predict what taxes will be like in ten years in California or other states, it could be much higher.
Inflation has basically doubled in the last 10 years.
The USA debt, decline. Impossible to tell what 680 million will be worth in 10 years.

then why don’t all other players do this? I studied economics. I think I know what I’m talking about.

That 68 million (minus the taxes) will earn 5% in dividends + capital gains. Compounding annually. That is usually a 10% return.

It’s a bad decision that doesn’t make financial sense.

He was never offered $68m today. Get that thought out of your head. It was never on the table.

 

[Golden_Jet]

Money is not a tangible asset, 680 million could be worth very little in 10 years. Nothing is guaranteed.

He has no way to predict what taxes will be like in ten years in California or other states, it could be much higher.
Inflation has basically doubled in the last 10 years.
The USA debt, decline. Impossible to tell what 680 million will be worth in 10 years.

then why don’t all other players do this? I studied economics. I think I know what I’m talking about.

That 68 million (minus the taxes) will earn 5% in dividends + capital gains. Compounding annually. That is usually a 10% return.

It’s a bad decision that doesn’t make financial sense.

Actually it does make financial sense, Kevin O’Leary was talking about this last night, and went into some of the reasons, said it was very smart move, also mentioned he makes 45 million a year currently in endorsements.

He wouldn’t of got 70 million with the Dodgers otherwise,
He likely does not live in California after retirement.

 

[Backs1r9m]

can you read?

My argument is actually that Shohei is assuming relative stability. Again money is imaginary. He has no way to determine what 680 will be worth. He is the one making assumptions. I’m saying he should have taken the money and turned it into tangible assets. Or do you not understand that with your MBA?

If he got paid his money and bought tangible investments a 10% annual ROI over a ten year period is conservative.

Its possible his financial advisor didn't study economics at QAnon Community College and understands that Ohtani like every other member of the super rich can borrow large sums against his guaranteed $680 million + yearly non baseball income at insultingly low rates just as Zuckerberg and Musk have been borrowing against their much more volatile securities their whole lives without having to sell.

 

[GaboriklessWild]

Right. None of the North American leagues get caught up in bribery scandals once per decade only because nobody is looking hard enough. Bettman has the entire North American media under his thumb… somehow…

What a pile of xenophobic nonsense.

Dude They are literally killing people by making people addicted to drugs. As an example, Boogaard was prescribed over a thousand pills by the NHL team doctor in just one season.

I imagine a significant proportion of NHL players may suffer from some kind of addiction.

 

[Spydey629]

can you read?

My argument is actually that Shohei is assuming relative stability. Again money is imaginary. He has no way to determine what 680 will be worth. He is the one making assumptions. I’m saying he should have taken the money and turned it into tangible assets. Or do you not understand that with your MBA?

If he got paid his money and bought tangible investments a 10% annual ROI over a ten year period is conservative.

Yes, I read. A lot, actually. And as a college professor I back up my arguments…

From Front Office Sports:

“While the Dodgers get a massive benefit from this structure, so does Ohtani, provided he’s not living in California after his playing career. If he resides in another state at that point, he’ll avoid California’s top tax rate — which will reach 14.4% starting Jan. 1 – and potentially save millions.

While Ohtani will receive just $2 million in yearly salary from the Dodgers during the deal, his current income is buttressed by more than $35 million in annual endorsements, a figure set to rise now that he’s playing for one of MLB’s marquee franchises.”

So here’s the thing with your rant. You aren’t looking at the big picture. Ohtani and his team are. The deferred salary will carry his current *total* income well into retirement, at pretty close to even. Because unless he’s Shaq, he will have a whole lot less endorsement income then than he does now.

You need to think five steps down the chessboard before criticizing.

 

[tucker3434]

Dude They are literally killing people by making people addicted to drugs. As an example, Boogaard was prescribed over a thousand pills by the NHL team doctor in just one season.

I imagine a significant proportion of NHL players may suffer from some kind of addiction.

Right, an instance that was reported extensively by the same media that you claim wants to sweep everything under the rug and later prosecuted by the us government.

But “you imagine.”

I guess anyone that can see corruption in something as simple as deferred salary will find a conspiracy in anything.

 

[JetsWillFly4Ever]

Other part to consider; he doesn't pay tax on his entire MLB salary based off of California tax rules.

He would only pay for the percentage of games in California (at least half for the home games plus all the road games he plays in California). So savings would be less than most people expect.

Hard to know the exact tax savings he will have, but I would imagine the PV of his contract including tax implications is less than 700 million but likely higher than what he would have been offered without any deferred compensation.

 

[Satan]

Yes, I read. A lot, actually. And as a college professor I back up my arguments…

From Front Office Sports:

“While the Dodgers get a massive benefit from this structure, so does Ohtani, provided he’s not living in California after his playing career. If he resides in another state at that point, he’ll avoid California’s top tax rate — which will reach 14.4% starting Jan. 1 – and potentially save millions.

While Ohtani will receive just $2 million in yearly salary from the Dodgers during the deal, his current income is buttressed by more than $35 million in annual endorsements, a figure set to rise now that he’s playing for one of MLB’s marquee franchises.”

So here’s the thing with your rant. You aren’t looking at the big picture. Ohtani and his team are. The deferred salary will carry his current *total* income well into retirement, at pretty close to even. Because unless he’s Shaq, he will have a whole lot less endorsement income then than he does now.

You need to think five steps down the chessboard before criticizing.

 

[bossram]

can you read?

My argument is actually that Shohei is assuming relative stability. Again money is imaginary. He has no way to determine what 680 will be worth. He is the one making assumptions. I’m saying he should have taken the money and turned it into tangible assets. Or do you not understand that with your MBA?

If he got paid his money and bought tangible investments a 10% annual ROI over a ten year period is conservative.

1. No, a 10% ROI in any relatively low-risk asset is not conservative. The S&P 500 averages roughly 8% annually, and that has a lot of volatility baked in (he could see a bear market and lose a lot short-term). You're not getting 10% in any Treasury Bond or safe-ish corporate bond.

2. It is likely there was never a true $700M offer. It was either $700M with large deferrals or $480M paid over the contract.

3. While the tax component is overstated (as they pay taxes based on where the games are played, so roughly half will be in California), he likely will save on taxes as it's pretty clear with the deferrals he will move to a lower-tax jurisdiction post-career.

4. Ohtani will be fabulously rich anyway. It seems he wasn't interested in milking every last dollar out of the Dodgers. He wanted to play there and make the deal compatible with building a championship team right now.

You might want to keep "studying" economics there bud.

 

[Tkachuk Norris]

Yes, I read. A lot, actually. And as a college professor I back up my arguments…

From Front Office Sports:

“While the Dodgers get a massive benefit from this structure, so does Ohtani, provided he’s not living in California after his playing career. If he resides in another state at that point, he’ll avoid California’s top tax rate — which will reach 14.4% starting Jan. 1 – and potentially save millions.

While Ohtani will receive just $2 million in yearly salary from the Dodgers during the deal, his current income is buttressed by more than $35 million in annual endorsements, a figure set to rise now that he’s playing for one of MLB’s marquee franchises.”

So here’s the thing with your rant. You aren’t looking at the big picture. Ohtani and his team are. The deferred salary will carry his current *total* income well into retirement, at pretty close to even. Because unless he’s Shaq, he will have a whole lot less endorsement income then than he does now.

You need to think five steps down the chessboard before criticizing.

Sp you think the 95.2 million he will save, assuming he goes to a state with zero state tax, is lless than the interest (dividends and capital gains) and inflation rate.

That’s crazy talk.

You’re basically saying 585 million will be worth more than the money he would be earning annually right now. Again. Crazy talk.

Now if the contract is actually 480 million and the 700 million figure is to account for inflation than it’s a different story. But saying 700 in ten years minus the taxes is worth more than 70 million annually you’re understanding of the economy is brutal.

 

[Voight]

Yes, I read. A lot, actually. And as a college professor I back up my arguments…

From Front Office Sports:

“While the Dodgers get a massive benefit from this structure, so does Ohtani, provided he’s not living in California after his playing career. If he resides in another state at that point, he’ll avoid California’s top tax rate — which will reach 14.4% starting Jan. 1 – and potentially save millions.

While Ohtani will receive just $2 million in yearly salary from the Dodgers during the deal, his current income is buttressed by more than $35 million in annual endorsements, a figure set to rise now that he’s playing for one of MLB’s marquee franchises.”

So here’s the thing with your rant. You aren’t looking at the big picture. Ohtani and his team are. The deferred salary will carry his current *total* income well into retirement, at pretty close to even. Because unless he’s Shaq, he will have a whole lot less endorsement income then than he does now.

You need to think five steps down the chessboard before criticizing.

I personally would take the money upfront cause nobody knows what the world will look like in a. decade but I understand why he did it.

 

[Golden_Jet]

Sp you think the 95.2 million he will save, assuming he goes to a state with zero state tax, is less than the interest he would receive on payment now is less than the interest (dividends and capital gains) and inflation rate.

That’s crazy talk.

You’re basically saying 585 million will be worth more than the money he would be earning annually right now. Again. Crazy talk.

He’s making over $40 million in endorsements right now per year, it makes sense.
Those endorsements will be going up with the Dodgers.

And for some reason you’re disagreeing with financial planners. Even Kevin O’Leary went on how it was a smart move, going over the reasons why.

You’re basically one of a few thinking otherwise lol. Take some financial planning, and tax courses, it might help you.

 

[Tkachuk Norris]

He’s making over $40 million in endorsements right now per year, it makes sense.
Those endorsements will be going up with the Dodgers.

And for some reason you’re disagreeing with financial planners. Even Kevin O’Leary went on how it was a smart move, going over the reasons why.

You’re basically one of a few thinking otherwise lol. Take some financial planning, and tax courses, it might help you.

He will receive 95 million more in $.
I get that

The problem is that inflation makes the money he receives in ten years worth less. And he isn’t collecting interest on the form of dividends and capital gains. Those are huge factors as well.

Not that complicated.

 

[Golden_Jet]

He will receive 95 million more in $.
I get that

The problem is that inflation makes the money he receives in ten years worth less. And he isn’t collecting interest on the form of dividends and capital gains. Those are huge factors as well.

Not that complicated.

I’ll take the opinion, of those that run / ran investment firms of over a billion dollars, and have a net worth of about an 1/2 billion, over an internet poster.
Thanks for coming out.
For some reason you keep overlooking the 40-50 million Ohtani makes with the deferral in endorsements.

 

[Tkachuk Norris]

I’ll take the opinion, of those that run / ran investment firms of over a billion dollars, and have a net worth of about an 1/2 billion, over an internet poster.
Thanks for coming out.
For some reason you keep overlooking the 40-50 million Ohtani makes with the deferral in endorsements.

explain to me what real wage is. Very common concept in economics. Tell me how it’s not a factor here. Not one poster has addressed this idea in their responses

The endorsements won’t effect his tax rate which are already way over the maximum tax bracket in California. He will get taxed 14% on that too.

 

[Spydey629]

Sp you think the 95.2 million he will save, assuming he goes to a state with zero state tax, is lless than the interest (dividends and capital gains) and inflation rate.

That’s crazy talk.

You’re basically saying 585 million will be worth more than the money he would be earning annually right now. Again. Crazy talk.

Now if the contract is actually 480 million and the 700 million figure is to account for inflation than it’s a different story. But saying 700 in ten years minus the taxes is worth more than 70 million annually you’re understanding of the economy is brutal.

Oh brother. I’ve got some reading for you to do…. Quite a few personal development books that revolve around the phrase:

“Get out of your own way.”

Just because you took Econ201 doesn’t make you an expert. As several other people noted, many financial gurus have lauded this contract.

Take the L and move on.

 

[Tkachuk Norris]

Oh brother. I’ve got some reading for you to do…. Quite a few personal development books that revolve around the phrase:

“Get out of your own way.”

Just because you took Econ201 doesn’t make you an expert. As several other people noted, many financial gurus have lauded this contract.

Take the L and move on.

No. You still have not addressed inflation/real wage once. Or post some quotes about why this makes sense. Explain to me how you factored that in and I’ll gladly be on my way and take a loss. Until than I’m going to assume you are full of shit

 

[Spydey629]

No. You still have not addressed inflation/real wage once. Or post some quotes about why this makes sense. Explain to me how you factored that in and I’ll gladly be on my way and take a loss. Until than I’m going to assume you are full of shit

I did. A while ago, when I used his FULL income, i.e. his $50 million a year in endorsements that you conveniently keep ignoring.

 

[Tkachuk Norris]

I did. A while ago, when I used his FULL income, i.e. his $50 million a year in endorsements that you conveniently keep ignoring.

lol that’s taxes. Again. Not what I was saying and nothing to do with inflation or real wage.

The highest tax bracket is 1.5 million in Cali. Which means any dollar earned over 1.5 mil will be taxed at the same rate, currently 12.3%. The tax rate will not increase due to his endorsements. But you should know that Mr MBA.

I’ll take the W thank you very much,