NEW YORK (AP) — Shohei Ohtani will receive just USD20 million of his USD700 million contract with the Los Angeles Dodgers over the next 10 years, with USD680 million payable from 2034-43 in an unusual structure that gives the team greater payroll flexibility in coming seasons.
Ohtani’s record-setting deal, agreed to Saturday, calls for annual salaries of USD70 million, according to details obtained by The Associated Press. Of each year’s salary, USD68 million is deferred with no interest, payable in equal installments each July 1 from 2034 to 2043.
For purposes of baseball’s luxury tax, the contract is valued as a yearly addition to the Dodgers’ payroll of about USD46 million. Under the collective bargaining agreement, for the calculation of a team’s tax payroll the value of deferred money is discounted at the federal mid-term rate. For all agreements this offseason, the discounting will be at the October 2023 rate of 4.43 per cent.
Ohtani’s contract, combined with those of Mookie Betts and Freddie Freeman, raises the Dodgers’ total of deferred money owed to the three to USD857 million from 2033 to 2044.
Betts has a USD365 million deal covering 2021-32 that includes USD115 million in deferred salaries payable from 2033 to 2044 and has the final USD5 million of his signing bonus payable from 2033 to 2035.
Freeman has a USD162 million, six-year deal for 2022-27 that includes USD57 million in deferred money payable from 2028 to 2040.
Los Angeles’ high points of the deferred payments are 2038 and 2039, when the trio will be owed USD83 million, and 2040, when they will be due USD84 million.
By receiving the vast majority of the money when he presumably will not be living in the United States, Ohtani also figures to have a tax benefit. California’s top tax rate for residents is 13.3 per cent.
Ohtani’s total dollars are 64 per cent higher than baseball’s previous record, a USD426.5 million, 12-year deal for Angels outfielder Mike Trout that began in 2019.
His USD70 million average salary is 62 per cent above the previous high of USD43,333,333, shared by pitchers Max Scherzer and Justin Verlander with deals they struck with the New York Mets. Ohtani’s average salary nearly doubles the roughly USD42.3 million he earned with the Angels. It also exceeds the entire payrolls of Baltimore and Oakland this year.
However, for the luxury tax he will count only slightly more than Aaron Judge, who is a USD40 million annual charge to the Yankees’ payroll as he enters the second season of a USD360 million, nine-year contract.
