When news of Shohei Ohtani’s historic 10-year, $700 million deal broke, reports suggested a significant amount of the money would be deferred to help reduce the Dodgers’ luxury tax burden.
They weren’t kidding.
According to Fabian Ardaya of The Athletic, $680 million of Ohtani’s $700 million will be deferred to the end of the contract. Ohtani will be paid $2 million annually over the life of the deal, and the remaining money will be paid without interest from 2034 to 2043.
Ohtani reportedly proposed the idea himself, and by deferring such a large portion of his salary, Ohtani will substantially reduce his contract’s luxury tax burden on the Dodgers, allowing the club to continue spending and add even more talent to their roster. According to Ardaya, Ohtani’s deal is expected to carry an average annually luxury tax hit of about $46 million.
Deferred money in MLB deals is nothing new. The New York Mets are famously still paying six-time All-Star Bobby Bonilla $1.19 million annually despite his last playing for the club in 1999, and will continue doing so until 2035. Manny Ramirez’s eight-year deal with the Red Sox also included deferred money, as did Mookie Betts’ 12-year, $365 million deal with the Dodgers.
While there’s never been such an extreme example of deferred money in an MLB contract, the deal isn’t likely to draw scrutiny from the league office. The Collective Bargaining Agreement between the league and players specifically addresses deferred money and says there is no limitation on how much can be deferred. The luxury tax system also factors deferred money into its calculations, so something like Ohtani’s deal wouldn’t be considered tax manipulation.
As for why Ohtani would propose this kind of deal, much less agree to it, the two-time MVP earns a huge amount of money through off-field endorsements, reportedly close to $50 million per year. Even if the Dodgers only paid him pocket change over the life of the deal, he’d still be one of the highest paid players in MLB.
And once those deferred payments kick in about a decade from now, he’ll still be long after he’s retired.