Ohtani contract may have another bonus: avoid California wage tax

SACRAMENT.- If the $700 million was not enough, the record contract that Shohei Ohtani signed with the Los Angeles Dodgers could include another bonus: skipping the well-known high salary tax California.

Not even the powerful Dodgers They have the power to prevent Ohtani from paying taxes, but they and the player can control when they will pay it. Los Angeles will pay him only $20 million over the next decade.

It will be 10 years later when the Dodgers They’ll really have to pay Ohtani — $68 million per year between 2034 and 2043. Ohtani will turn 40 in 2034, the age at which most players have retired. By then, Ohtani could stop playing and choose not to live in California and possibly avoid most of the federal wage tax. 13.3% and the payment tax 1.1% for State Disability Insurance.

Because 97% of Ohtani’s salary with the Dodgers will be paid later, this means that California — which has a $68 billion budget deficit this year — will have to wait another decade to receive taxes on its paycheck, if it even takes anything. California He can still receive taxes from Ohtani’s endorsement deals, assuming the Japanese player resides in the state.

It’s impossible to know how much state taxes Ohtani will pay. California does not allow state officials to release information about an individual. Depending on the agency that receives the income taxes, the amount and when they are paid varies depending on the technical details of the contract, that are not available to the public.

But the details that are public appear to comply with federal provisions that prohibit states from receiving taxes on the retirement of former residents of that state, he said. Kirk StarkProfessor of UCLA specialized in tax law and co-author of the book on state and local taxes.

Ohtani thought about the whole:

During the press conference at his presentation at the Dodger Stadium On Thursday, Ohtani said he structured his contract to help the team, not him. He wants the club to be free to spend on good players.

Taxes for professional athletes are more complicated because they not only pay in the state in which they reside, but in which they work, so they may be subject to tax when traveling for a day to play in another state.

According to California Center for Jobs and the Economy, The state is expected to miss out on up to $98 million in taxes from Ohtani — according to some estimates. Brooke Armorpresident of the group, said it would take about 317 similar contracts to cover the fiscal deficit of California.

“It’s a small number of people and when someone who earns that much leaves, it hits the budget,” he admitted. “It shows you how volatile and fragile the state’s collection system is.”.