cdj
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Post by cdj on Dec 11, 2023 23:31:49 GMT -5
We’re so getting locked out in 2026
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Post by incandenza on Dec 12, 2023 1:08:11 GMT -5
If Ohtani had signed for 10/460 a week ago would anyone have cried shenanigans? They're just putting the money in trust for him, essentially. Thanks to wcsoxfan's explanation in the deferrals thread, I understand this now. But to be fair to the people crying shenanigans, Ohtani's (and the team's) own spin on this implies that there are shenanigans! It's being reported that it was his idea to defer all this money so that the team would have more to spend on other free agents to build a winner around him. That implies that he's doing the team a favor, which implies the deferrals are granting the team a competitive advantage, which implies they are a loophole that's being exploited.
It's a little annoying that he (or his representatives) are framing it this way while simultaneously getting the glory of the largest contract in sports history, and also a little annoying that reporters are going along with it.
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Post by scottysmalls on Dec 12, 2023 7:28:32 GMT -5
Right, the PR spin they’re doing is that they agreed on a $700m contract, which otherwise would not have been so substantially deferred, and then Ohtani proposed to delay most of the money to help the team. It’s fine sort of but it is obviously going to cause fans who won’t read as much into it as us here to freak out.
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Post by redsoxfan2 on Dec 12, 2023 7:42:03 GMT -5
I'm trying to read through all these comments and understand better.
I get the contract is closer to 500 million in real dollars and 700 is with inflation.
Is Ohtani not getting paid 2 million per year until his contract expires? Wouldn't that only count as 2 million per against the luxury tax until the deferments hit or am I missing something? That seems like a giant competitive advantage for big market teams who can just invest that money and pay it later on while also the hit down the road is less cumbersome.
Also, does Ohtani still need to pay California taxes on his contract if in 10 years he moves to Florida?
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Post by scottysmalls on Dec 12, 2023 7:49:34 GMT -5
I'm trying to read through all these comments and understand better. I get the contract is closer to 500 million in real dollars and 700 is with inflation. Is Ohtani not getting paid 2 million per year until his contract expires? Wouldn't that only count as 2 million per against the luxury tax until the deferments hit or am I missing something? That seems like a giant competitive advantage for big market teams who can just invest that money and pay it later on while also the hit down the road is less cumbersome. Also, does Ohtani still need to pay California taxes on his contract if in 10 years he moves to Florida? Will try to answer these in order as best I understand: 1) Yes he will only receive 2 million per year for the first 10 years 2) No the present value of the deferrals is accounted for for the luxury tax during the term of the contract, so his LT AAV will be about $46M. 3) The Dodgers do still have to put that $46m aside and make sure it’s accounted for, but there is a possibility that they can profit by beating a 5% rate of return 4) No, it seems like he’ll be able to save substantially on taxes by receiving much of the money when he is not living/working in California |
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Post by redsoxfan2 on Dec 12, 2023 8:04:41 GMT -5
I'm trying to read through all these comments and understand better. I get the contract is closer to 500 million in real dollars and 700 is with inflation. Is Ohtani not getting paid 2 million per year until his contract expires? Wouldn't that only count as 2 million per against the luxury tax until the deferments hit or am I missing something? That seems like a giant competitive advantage for big market teams who can just invest that money and pay it later on while also the hit down the road is less cumbersome. Also, does Ohtani still need to pay California taxes on his contract if in 10 years he moves to Florida? Will try to answer these in order as best I understand: 1) Yes he will only receive 2 million per year for the first 10 years 2) No the present value of the deferrals is accounted for for the luxury tax during the term of the contract, so his LT AAV will be about $46M. 3) The Dodgers do still have to put that $46m aside and make sure it’s accounted for, but there is a possibility that they can profit by beating a 5% rate of return 4) No, it seems like he’ll be able to save substantially on taxes by receiving much of the money when he is not living/working in California I appreciate the response! So, they are still getting hit on 46 million against the luxury tax per year rather than 2 during the first 10 years, yes? It's unique and interesting for all parts, but not paying California tax irks me. He's being paid out by an organization based in California and the money earned will be from California. I fear this will lead to more players considering deals like this to avoid exuberant tax penalties. |
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redsox04071318champs
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Post by redsox04071318champs on Dec 12, 2023 8:07:05 GMT -5
Will try to answer these in order as best I understand: 1) Yes he will only receive 2 million per year for the first 10 years 2) No the present value of the deferrals is accounted for for the luxury tax during the term of the contract, so his LT AAV will be about $46M. 3) The Dodgers do still have to put that $46m aside and make sure it’s accounted for, but there is a possibility that they can profit by beating a 5% rate of return 4) No, it seems like he’ll be able to save substantially on taxes by receiving much of the money when he is not living/working in California I appreciate the response! So, they are still getting hit on 46 million against the luxury tax per year rather than 2 during the first 10 years, yes? It's unique and interesting for all parts, but not paying California tax irks me. He's being paid out by an organization based in California and the money earned will be from California. I fear this will lead to more players considering deals like this to avoid exuberant tax penalties. Still unsure how the AAV winds up 46 million. What equation is it using to get there? It's not going 70 divided by 10 or 20. |
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Post by 0ap0 on Dec 12, 2023 8:30:47 GMT -5
If you invest ~$50M/year at a %5 a.p.r. you end up with $700M in ten years (to hand to Ohtani). That's why that's the AAV for CBT purposes (with smaller tweaks for the $2M/year you actually hand the guy).
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Post by dsorc on Dec 12, 2023 8:33:07 GMT -5
Still unsure how the AAV winds up 46 million. What equation is it using to get there? It's not going 70 divided by 10 or 20. I believe it should be a compound interest formula: Total = Deferred (1 + Interest Rate) ^ Years. I cannot make it equal to 70 with 5% but it works with 4.5%. Assume the original salary is 46. 2 of that is paid and 44 is deferred for 10 years. 44 * 1.045^10 is equal to 68 ish. The numbers are being rounded in the reports so it is hard to ensure everything is right. This is a really great media manipulation from his agent. If we had gotten the number based on the AAV up front, people wouldn't be going crazy. But by reporting the number based on the post-interest amount it completely changes the narrative. |
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Post by scottysmalls on Dec 12, 2023 8:39:10 GMT -5
Will try to answer these in order as best I understand: 1) Yes he will only receive 2 million per year for the first 10 years 2) No the present value of the deferrals is accounted for for the luxury tax during the term of the contract, so his LT AAV will be about $46M. 3) The Dodgers do still have to put that $46m aside and make sure it’s accounted for, but there is a possibility that they can profit by beating a 5% rate of return 4) No, it seems like he’ll be able to save substantially on taxes by receiving much of the money when he is not living/working in California I appreciate the response! So, they are still getting hit on 46 million against the luxury tax per year rather than 2 during the first 10 years, yes? It's unique and interesting for all parts, but not paying California tax irks me. He's being paid out by an organization based in California and the money earned will be from California. I fear this will lead to more players considering deals like this to avoid exuberant tax penalties. Its true that the entity that loses the most here might be California, the state misses out on hundreds of millions of dollars potentially. Although, it’s possible he just would have signed elsewhere if he couldn’t do this, and they’d be getting nothing at all. This way they still get cuts of his $2m and the endorsement money he makes there, plus a cut of additional profit the Dodgers make. |
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Post by julyanmorley on Dec 13, 2023 10:11:12 GMT -5
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Post by ematz1423 on Dec 13, 2023 10:13:51 GMT -5
Can't blame Ohtani for taking the LAD over SFG if their offers were identical. You'd think the Giants would understand that and up the offer a bit to at least give him something to think about.
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Post by soxfaninsyracuse on Dec 13, 2023 10:58:00 GMT -5
I appreciate the response! So, they are still getting hit on 46 million against the luxury tax per year rather than 2 during the first 10 years, yes? It's unique and interesting for all parts, but not paying California tax irks me. He's being paid out by an organization based in California and the money earned will be from California. I fear this will lead to more players considering deals like this to avoid exuberant tax penalties. Its true that the entity that loses the most here might be California, the state misses out on hundreds of millions of dollars potentially. Although, it’s possible he just would have signed elsewhere if he couldn’t do this, and they’d be getting nothing at all. This way they still get cuts of his $2m and the endorsement money he makes there, plus a cut of additional profit the Dodgers make. The state income tax angle is interesting. First, doesn't the location of the games dictate where state income tax is paid? In other words, doesn't California normally get revenue on a little over half of Dodger's player salaries? Second, on the deferred compensation portion, do any states have procedures in place to capture that revenue? The amount of deferred compensation is unusual, but the concept isn't new. |
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Post by Oregon Norm on Dec 13, 2023 11:09:34 GMT -5
You're right it is not. It shows up in a few contracts and the language in the CBA is clear. This won't be the last time it's used. The interesting part of this, for me, is the way the $700M figure became a PR flag waved high above the crowd of journalists to get them to follow along. The devil is in that detail.
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Post by incandenza on Dec 13, 2023 12:48:41 GMT -5
It would have been so much more interesting if he had gone to the Giants. I think I like Ohtani about 10% less after the way this played out.
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Post by jimed14 on Dec 13, 2023 13:31:16 GMT -5
Red Sox will be paying Chris Sale $10M per year from 2035-2039, which brought his Luxury Tax AAV down to a little more than $25M instead of $29M (5/$145M).
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Post by julyanmorley on Dec 13, 2023 15:41:07 GMT -5
Who is it? Kiké?
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Post by fenwaydouble on Dec 13, 2023 15:54:47 GMT -5
Has to be his translator or something, right? |
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Post by ematz1423 on Dec 13, 2023 15:59:02 GMT -5
I'd love to know who the personnel is, unless it's like Dave Roberts or something there is probably 0 chance they fire whoever it is assuming it's a coach anyway.
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Post by asm19 on Dec 13, 2023 19:06:44 GMT -5
WTF? Is this real?
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Post by julyanmorley on Dec 13, 2023 19:07:33 GMT -5
Must be nice to be Andrew Friedman
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Post by incandenza on Dec 13, 2023 19:17:43 GMT -5
What would "opting out" mean after, say, year four of this deal? He'll have banked $8 million and would be leaving $692 million on the table? Or he would still receive 4/10ths of the deferred cash?
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Post by orion09 on Dec 13, 2023 19:31:28 GMT -5
I have to imagine any opt-out would lock in the deferred money earned up to that point. Otherwise it would have no teeth or utility - can’f imagine Ohtani or his agents going for that.
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Post by Underwater Johnson on Dec 13, 2023 19:36:15 GMT -5
Of course it's real. It was Friedman's idea! |
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Post by 0ap0 on Dec 14, 2023 10:42:38 GMT -5
I hope there's fun stuff that's not ruled out in there like Ohtani being able to buy Friedman off to allow him to take a new contract.
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