The Dodgers built a championship roster in 2024 thanks in large part to a specific contract clause given to Mookie Betts, Freddie Freeman, Shohei Ohtani and Will Smith. Each player has a portion of their annual salary deferred until after their contract expires.
The #Dodgers have now secured $964M of deferred payments since July 2020.
Why would the Dodgers choose to defer more than $900 million in present-day contract obligations to players who are no longer on their active roster? Several reasons stand out:
The Dodgers’ owners can pocket the deferred money owed to Ohtani, Betts, Freeman, Smith, Snell, and now Edman, invest it in one of their preferred vehicles, and have more money to pay their players when the checks come due.
Deferring money lowers the present-day value of a contract, which is directly tied to the team’s competitive balance tax calculation. Ohtani’s contract, for example, is for 10 years and $700 million, but the team is assessed a tax on only $46 million each year of the contract.
Players who live and work in California, where high earners face the largest income tax rates in the country, can pay lower tax rates on their deferred salaries simply by moving out of state — a point that helps the Dodgers, and the other four California-based MLB teams, when negotiating salary terms with free agents.
Former Angels pitcher Jered Weaver articulated the latter point on his Twitter/X account Saturday.
Everyone complaining about this deferred money situation w the dodgers… makes it easier to sign knowing you won’t pay Cali taxes on all your money.. might be onto something obviously
— Jered Weaver (@Weave1036) December 1, 2024
As Weaver notes, there is a controversy around the practice of teams deferring players’ salaries. Many fans have called it a “loophole” in baseball’s collective bargaining agreement.
Even Ken Rosenthal, of Fox Sports and The Athletic, suggested there was a loophole to be closed in the next round of CBA negotiations around how deferred-money deals are calculated toward the competitive balance tax.
More to come on this story from Newsweek Sports.
NEW YORK, NEW YORK – OCTOBER 28: Shohei Ohtani #17 of the Los Angeles Dodgers reacts after being walked in the first inning against the New York Yankees during Game Three of the 2024 World… NEW YORK, NEW YORK – OCTOBER 28: Shohei Ohtani #17 of the Los Angeles Dodgers reacts after being walked in the first inning against the New York Yankees during Game Three of the 2024 World Series at Yankee Stadium on October 28, 2024 in the Bronx borough of New York City. Ohtani is deferring $680 million of his $700 million salary.
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