After it was announced Dodgers P/DH Shohei Ohtani was collecting $68M per year in interest-free deferrals, the industry chatter “shifted, and skepticism increased,” according to Drellich & Rosenthal of THE ATHLETIC. Drellich & Rosenthal asked “is the deferral structure good for the player and the game? Is it a luxury tax dodge?” One player agent said, “Most agents would probably say it’s the worst thing ever, because that’s what happens when some guy does a record deal.” They added, “I think actually in this case, it’s the truth: It’s one of the worst things I’ve ever seen, for a lot of reasons.” That agent, like some other agents, believed that the “present value of Ohtani’s deal to be too low.” But others reacted in a “more restrained manner,” saying that with the deferral terms, the contract “finally just made sense.” A rival exec said, “They dressed it up to get that shock value, that big number. But when you actually factor in the present value with the deferrals, it’s in the range you would have expected.” On a straight 10-year, $700M deal without deferrals, Ohtani would count for $70M in “competitive-balance-tax calculations every year.” With the deferrals, though, Ohtani’s “CBT number drops” to $46M. Some could argue that the deferrals “equate to a dodge, a loophole, a way of manipulating the system -- without breaking the sport’s rules” -- to make Ohtani “count for less in luxury tax than he should.” Another rival exec said that the contract structure is a “f—ing joke. It’s a complete joke.” Another exec with a smaller-market team said, “It just doesn’t bother me.” They added, “Rules say it’s perfectly above board and it’s still a $46 million CBT hit, so I struggle to see it as a dodge. Move on” (THE ATHELTIC, 12/13).
NEVER SEEN BEFORE: In D.C., Chelsea Janes wrote while deferred money is common in large MLB contracts, “no one imagined the need to safeguard against the most coveted player ever choosing to postpone payment of 97 percent of his record-setting deal.” Janes wrote assuming it will “not be allowed to happen again.” Ohtani and the Dodgers invented some “next-level competitive balance tax evasion.” Ohtani is “too humble and likable to be a villain.” But “hatred -- or envy -- of the Dodgers just rose to a preposterous level” (WASHINGTON POST, 12/12).
IS THIS FAIR? SiriusXM’s Chris Russo said that the whole idea of the luxury tax “is to prevent hoarding of Major League players.” Russo: “This is an absolute disgrace. This is completely unfair to the ethics of the game. Baseball cannot allow this.” Russo called the contract a “joke” and said “baseball is going to allow the Dodgers to bring in Ohtani and allow them to defer all the money so they don’t get murdered with the luxury tax to give them a chance to sign all these players.” Russo: “Is this what baseball wants? If you’re the owner of the Pirates or the Diamondbacks or more preferably in your own division … you’d be raising hell with the commissioner. You’re going to allow this?” (“Mad Dog Unleashed,” SiriusXM, 12/11).
