The Houston Astros are hated because they cheated. The Dodgers don’t cheat. Outside of Los Angeles, however, they are hated more and more every day.
The money supply seems inexhaustible. The same goes for the All-Star lineage. But it’s the deferred contracts that could anger detractors the most.
The defending World Series champions have bolstered their roster with a series of “play now, pay later” deals, all in accordance with the collective bargaining agreement, all giving the Dodgers a modest reduction in their luxury taxes. And so, the haters ask, can anyone stop the Dodgers?
Josh Becker wishes so. He’s a senator from California, a Democrat from Menlo Park. The Dodgers have postponed by more than a billion dollars in salary over the last five years. Every dollar of deferred wages could be a dollar the state cannot tax.
“The Dodgers are exploiting this loophole,” Becker told me. “It was never intended for something like this.”
The loophole is this: Under federal law, if you earn your salary in one state and retire elsewhere, you may not have to pay income tax on the salary you defer for retirement.
Learn more: How the Dodgers benefit from salary deferrals and signing bonuses to build their roster
That puts California at risk of losing up to $138 million in revenue due to the Dodgers’ deferrals — $90 million on Ohtani’s contract alone, should he return to Japan or move to another state after the expiration of his contract.
“It exploits something that was supposed to be reserved for people with $20,000 or $25,000 pensions… people who will receive a small amount of pension, later in life, as a real retirement,” Becker said. “This is what it was supposed to be.
“We have a system in place. Other people comply. And you’re essentially avoiding taxes that others have to pay. This is a question of fundamental fairness.
In December 2023, the Dodgers signed Ohtani to a 10-year, $700 million contract, with $680 million carried over beyond the duration of the contract. Four weeks later, State Comptroller Malia Cohen said the contract illustrated the need for Congress to limit the amount of money that could be deferred without being subject to taxes.
“This action would not only create a fairer tax system,” Cohen said. in a statement“but also generate additional revenue that can be devoted to solving important and pressing social problems and promoting economic stability.”
Last March, Becker presented an invoice which urged Congress to “establish a reasonable cap on deferred compensation.” The first line of the bill: “WHEREAS, in December 2023, the Los Angeles Dodgers baseball team signed pitcher and hitter Shohei Ohtani to a 10-year, $700,000,000 contract. »
The invoice authorized the State Senate but he died in the assembly; Becker withdrew the bill after realizing it would not pass.
Learn more: Shohei Ohtani donates $500,000 to fight fires. Here’s how other Los Angeles sports figures are helping
California’s income tax rate for high earners is 13.3%, the the highest in the country. It would make financial sense for players and others to retire in states like Florida and Texas, where there is no income tax.
Among the concerns Becker said he has heard about his bill is that wealthy executives, not just baseball players, benefit from such deferred compensation.
“They shouldn’t use it either,” he said. “Let’s fill this gap. »
Becker said he might re-introduce his bill. His timing could be better. The bill essentially asks Congress to force certain people to pay more taxes. There’s a better chance the Colorado Rockies will win the World Series this year than Congress would pass — and President Trump would sign — such a bill.
“If anything, they’re focused on cutting corporate taxes, rather than making people pay their fair share,” Becker said.
Becker represents a district in the San Francisco Giants territory, but grew up in Philadelphia and remains a Phillies fan. He doesn’t really blame the Dodgers. He blames Congress. Shh, but he kind of admires the Dodgers.
“The Dodgers,” he said, “are building a little dynasty there.”
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This story was originally published in Los Angeles Times.
