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Post by jmei on Jan 19, 2015 15:37:56 GMT -5
I don't doubt that there are federal/state income tax intricacies involved for both player and team. But all reports indicate that they didn't structure the payouts the way they did in an attempt to avoid or circumvent the MLB Competitive Balance Tax (the luxury tax), which is what I was objecting to. You're objecting for the sake of objecting. I am stating an opinion based on professional experience. Add to this that reports are already discussing the potential individual income tax considerations behind this deal and you should ask yourself "what exactly are you objecting to?"
sports.yahoo.com/news/sources--max-scherzer-s-7-year---210-million-deal-with-nats-contains-historic-deferrals-164857543.html
Furthermore, any individual income tax considerations are actually dwarfed by what the team can save in luxury tax if I am correct in my line of reasoning. I don't like Boras, but I think he has done something quite interesting here.
I'm objecting to your claim that there are significant luxury tax savings by structuring the transaction the way they did. I've already posted one report indicating that for luxury tax purposes, there's not a significant savings. There are other reports corroborating that interpretation. This is all separate from federal/state income tax considerations. My only objection is with regards to your claim that Boras "found an end around the luxury tax." I don't think that claim is true.
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Post by jmei on Jan 19, 2015 15:45:33 GMT -5
If the net present value on Scherzer's contract is $131 million, that's about $39 million less than the equal NPV of $170 million over 7 years instead of 14. You can't compare Scherzer's NPV to Lester's non-NPV, which is what you're doing. The NPV of Lester's contract (7/$170m, slightly front loaded) is still slightly less than Scherzer's NPV. Using a 7% discount rate (which might even be aggressive), it's about $130m to Scherzer's $131m and change. Not much, but a little more.
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Post by jimed14 on Jan 19, 2015 15:45:50 GMT -5
If the net present value on Scherzer's contract is $131 million, that's about $39 million less than the equal NPV of $170 million over 7 years instead of 14. I cannot imagine that the backloading and deferrals in the deal is worth $39 million in fewer tax dollars paid. I'd put the tax savings argument more on Boras saving face on a less than expected contract. And maybe the rest of it on giving the Nationals an easier way of handling cash flow. Are you aware that Scherzer was ever offered 7 years / $170 million with no deferrals by any team? Multiple reports indicate the Tigers offered him 6 years / $144 million with no deferrals. Perhaps a higher number simply never materialized. Yes right, I think that's much more likely the case than Scherzer/Boras being geniuses trying to avoid taxes or the luxury tax. This deal screams that it's way more help to the Nationals than Scherzer.
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Post by jimed14 on Jan 19, 2015 15:48:16 GMT -5
If the net present value on Scherzer's contract is $131 million, that's about $39 million less than the equal NPV of $170 million over 7 years instead of 14. You can't compare Scherzer's NPV to Lester's non-NPV, which is what you're doing. The NPV of Lester's contract (7/$170m, slightly front loaded) is still slightly less than Scherzer's NPV. Using a 7% discount rate (which might even be aggressive), it's about $130m to Scherzer's $131m and change. Not much, but a little more. I wasn't. I was arguing with the Washington DC income tax meme. I'm talking two different points here - that he barely got more than Lester and that he really didn't help himself by deferring money. I think Boras saved face because most people will say "$210 million" while he didn't actually get close to that and it's too difficult for most to understand.
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Post by mgoetze on Jan 19, 2015 16:31:06 GMT -5
I don't really like the 7% discount rate. Putting 100% in the stock market is not exactly prudent wealth management.
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Post by jimed14 on Jan 19, 2015 16:35:12 GMT -5
I don't really like the 7% discount rate. Putting 100% in the stock market is not exactly prudent wealth management. No one does that. Rich people spread it around and make a lot more than 7% on some investments and hedge with other investments.
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Post by jimed14 on Jan 19, 2015 17:01:47 GMT -5
They need to stop that crap pretty damn quick.
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Post by pedroelgrande on Jan 19, 2015 17:16:32 GMT -5
@jeffpassan: Source: Yovani Gallardo to Rangers deal is done. Brewers get back IF Luis Sardinas, RP Corey Knebel and 18-year-old RHP Marcos Diplan.
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Post by jerrygarciaparra on Jan 19, 2015 19:26:25 GMT -5
They need to stop that crap pretty damn quick.
Because of all the tax considerations that went into this deal, my strong suspicion is that either Texas or Miami was a runner-up in the Scherzer sweepstakes. According to this argument, the favorable tax issue would have gone away once a creative enough tax schedule was devised to make the Washington offer competitive. To Scherzer's credit, he appears to have jumped through hoops to end up on a team perceived by many to be capable of contending for a title. That being said, Texas and Miami aren't exactly chopped liver.
Why would you think that? I think if anything, there may have been almost no market for what Boras was looking for and so the tax considerations was a way to get something done. I think, in the long run, Boras has screwed all his future clients by being a greedy SOB for all those years (on behalf of his client...yes) and you wont see these kind of free agent pitcher contracts much anymore..Again, market correction made this deal...not competition from other teams (or lack thereof)
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Post by philsbosoxfan on Jan 19, 2015 19:54:09 GMT -5
So $15 million/year puts him in a lower tax bracket? I find that farfetched. Just for the sake of argument, let's say that the $15 million / year paid to Scherzer for years 8 through 14 was paid for "personal services" he performed for the club not in Washington, D.C. but in the state of Florida (Let's say he'll be an extremely well paid "scout), then should he not be entitled to be exempted from state income tax on that portion (since Florida has no state income tax)? There's also the point that it's not just the tax bracket itself (which is the marginal bracket of the last dollar) it's 7 additional years of the savings on all the brackets to get to the top bracket. Imagine the behind the scenes nightmare that will have to take place if Scherzer ever gets traded.
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Post by taftreign on Jan 19, 2015 20:49:14 GMT -5
A very unique contract indeed. It appears Scherzer will be paid out over at least 20 years...$15 million/year for years 1-14 with half that amount ($105 million) deferred until after year 14, at which point that $105 million will be paid out according to some as yet unreported schedule. To make up for all the deferrals, Scherzer gets a $50 million signing bonus spread out over an again as yet unreported number of years (though I presume the term to be 7 years). So, at the end of the day, Scherzer might end up with something like $14.5 million per year for years 1-7, $7.5 million / year for years 8-14 and $15 million / year for years 15-21. sports.yahoo.com/news/sources--max-scherzer-s-7-year---210-million-deal-with-nats-contains-historic-deferrals-164857543.html"Scherzer will get $15 million a year for the next 14 years, sources said, deferring half the money until after the contract expires. It is by far the largest sum ever deferred in a deal, not quite matching Bobby Bonilla’s 25-year deferral from the Mets in length but more than tripling it in value." I don't see any report stating this money goes beyond 14 years. I take the quote as he is getting 15 mil per year with half the money 105 million coming after the contract expires in year 7. I see it as 105 mil in years 1 - 7 and 105 mil in years 8 - 14 which is again after the contract expires. Perhaps I'm reading incorrectly but I think the quote is being misinterpreted in your scenario.
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Post by jmei on Jan 19, 2015 21:31:39 GMT -5
Yeah, the "deferring half the money until after the contract expires" is referring to years 8-14 (since it's still a seven-year contract), not years 15-21.
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Post by philsbosoxfan on Jan 19, 2015 22:21:10 GMT -5
Ken Rosenthal ?@ken_Rosenthal 5h5 hours ago Problem for Tex was $$$ RT @jonmorosi: #Rangers and #Phillies had in-depth trade talks on Cole Hamels before Gallardo trade, source says.
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Post by fenwaythehardway on Jan 20, 2015 0:10:51 GMT -5
Really the highlight of the offseason for me is when we talk about state and federal income tax rates.
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Post by Oregon Norm on Jan 20, 2015 11:27:48 GMT -5
I'd like to recommend the Hardball Times series 10 things we hope baseball improves upon under its 10th commissioner. The first one I read, PEDs - From Saviour to Villain and Back Again? doesn't hesitate in criticizing MLB's tactics for obtaining information against ARod, and Manfred directly for his testimony at the ARod hearing. It also makes the most rational case I've seen for moving MLB past it's schizoid approach to performance enhancers over the last 20 years. I'm also working through the one on minor league salaries, and it's a good read, That one includes details - with links - on the current status of the law suits against MiLB working their way through the court system. Give a look if you have the time.
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Post by philsbosoxfan on Jan 21, 2015 5:05:40 GMT -5
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Post by taftreign on Jan 22, 2015 14:28:11 GMT -5
It is not unusual for top executives or managers to have a player compensation attached in certain situations including as we know Theo to the Cubs. These players or prospects are generally of little influence or impact at the time of the deal. It seems however the Duquette saga is turning into a different story. Olney is reporting that one name that has come up is Jeff Hoffman last years 1st round pick who fell do to Tommy John after being considered for the top pick in the draft. Apparently Baltimore is looking at filing tampering charges against Toronto and "are willing" to accept a player like Hoffman to settle both this tampering and compensation for Duquette. Interested to see were this one goes.
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Post by James Dunne on Jan 23, 2015 19:47:30 GMT -5
John Hickey @jhickey3 · 56m 56 minutes ago "Slight rotator cuff tear" will keep #Athletics LHP Sean Doolittle from being ready to start. 2015 as #Athletics closer.
Probably makes Clippard the closer. Guessing Beane had some inkling of this last week when he dealt Escobar.
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Post by philsbosoxfan on Jan 24, 2015 1:12:16 GMT -5
Sad news...Ernie Banks died. Very sad indeed. One of the nicest most energetic personalities ever. "Let's play two."
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Post by philsbosoxfan on Jan 25, 2015 8:12:04 GMT -5
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Post by jimed14 on Jan 25, 2015 9:30:10 GMT -5
Jeez, there are a lot of things we never heard about. This is crazy:
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Post by philsbosoxfan on Jan 25, 2015 9:49:29 GMT -5
Jeez, there are a lot of things we never heard about. This is crazy: Imagine the autobiography after he retires.
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Post by ray88h66 on Jan 25, 2015 14:33:54 GMT -5
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Post by bluechip on Jan 25, 2015 14:51:41 GMT -5
Ortiz's batting average would spike again, that's for sure. Banning shifts is moronic, it's been a part of the game since before the 1940s. Does he go a step farther and say an outfielder he can't play so shallow that he can cover second base (like Tris Speaker in the 1920s) or a left fielder come in occasionally to cover on bunts (like King Kelly in the 1890s)?
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Post by fenwaythehardway on Jan 25, 2015 14:57:38 GMT -5
A solution in search of a problem. It's the strike zone, stupid.
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