Overpaying Ohtani

[Nasty_Magician]

So hypothetically what happens if he dies in like 2035? Are Dodgers paying $68 million per year to his estate or are they free and clear of their obligation?

 

[calsnowskier]

So hypothetically what happens if he dies in like 2035? Are Dodgers paying $68 million per year to his estate or are they free and clear of their obligation?

Talking out of my ass…

I assume he is accruing 70M per while getting paid 2M and deferring 68M.

I don’t understand how that would change the doggies tax hit, though.

 

[DJ Fieri]

 

[Mebert]

Talking out of my ass…

I assume he is accruing 70M per while getting paid 2M and deferring 68M.

I don’t understand how that would change the doggies tax hit, though.

Basically inflation. 68 million today is worth less that 68 million in 20 years. So the value is lowered based the current prime rate. In this case enough to drop the competitive balance number from 70 to 46 million.

 

[msgkings322]

Talking out of my ass…

I assume he is accruing 70M per while getting paid 2M and deferring 68M.

I don’t understand how that would change the doggies tax hit, though.

On the radio they said the cap hit is still $46 mil per year even with the deferral

 

[Hunter Montana]

Report: Shohei Ohtani to defer all but $20M of his $700M Dodgers contract until after its completion in 2034

Ohtani reportedly won't see $680 million of his groundbreaking contract for more than a decade. The deferral was reportedly his idea.

sports.yahoo.com

Per The Athletic, Ohtani is believed to make $50 million annually in non-baseball income. That on top of his previous endorsement income and the roughly $42 million he made playing for the Los Angeles Angels presumably make it considerably easier for Ohtani to put off receiving $680 million in salary.

I know....right? How can anyone afford to live on just $2 million per year? Ohtani must have to clip a lot of coupons.

 

[ducky]

That deferral COMPLETELY changes the value of this contract. Especially because there is no interest reportedly.

Factoring in 5% rate of return, It turns the contract in reality to about 10 year $430 million deal. Even less when you consider most people gain more than 5% when investing.

 

[wazzu31]

Why does it suck because Dodgers aren't better than the Braves?

It sucks that he went to the Dodgers but also it kind of sucks that his chances of winning a World Series with the Dodgers is the same as it was with the Angels.

 

[wazzu31]

On the radio they said the cap hit is still $46 mil per year even with the deferral

Which kind of makes the luxury tax pointless doesn’t it?

 

[msgkings322]

Which kind of makes the luxury tax pointless doesn’t it?

How so? The 46 counts for a lot. It's pointless for certain teams like the Dodgers and Mets no matter what the numbers are

 

[Cedrique]

It sucks that he went to the Dodgers but also it kind of sucks that his chances of winning a World Series with the Dodgers is the same as it was with the Angels.

Oh I forgot, the Braves have the next decade of trophies locked up.

 

[wazzu31]

Oh I forgot, the Braves have the next decade of trophies locked up.

Over the Dodgers, yeah. Not penciling in the Braves to win the World Series. I’m just saying the Dodgers have two huge holes, they need lots of pitching and they choke when they play more than 70 games.

 

[steveringo]

On the radio they said the cap hit is still $46 mil per year even with the deferral

I always thought they simply calculated the AAV of the contract remaining... but they do have a deferred calculation.

" Let us say, for discussion purposes, Ohtani’s $70M salary has $20M paid per year immediately, and the other $50M deferred for 20 years at 0% interest. Applying that 4.43% discount rate, for CBT purposes, that $50 million to be paid in 2044 is equivalent to just over $20M to be paid in 2024. And thus, for CBT purposes, Ohtani’s 2024 salary would be treated as a little over $40M, rather than $70M."

On deferred money and the MLB luxury tax

Some info regarding how deferred money can reduce a team’s Competitive Balance Tax hit

www.lonestarball.com

 

[calsnowskier]

That’s why in reality it is a 10/460, not a 10/700. The deferred payments essentially have interest already baked in

 

[calsnowskier]

The doggies got him well below wat was expected (10/500+)

 

[wazzu31]

That’s why in reality it is a 10/460, not a 10/700. The deferred payments essentially have interest already baked in

Which is still bullshit. All of the deferred money should be counted towards the CBT. Otherwise Ohtani needs to sign a 25 year 700 million or however many years it came out to.

 

[calsnowskier]

Which is still bullshit. All of the deferred money should be counted towards the CBT. Otherwise Ohtani needs to sign a 25 year 700 million or however many years it came out to.

The deferment schedule has nothing to do with the tax implementations (MLB, not California). For the tax implications, the payments are essentially assumed to be paid in full, in equal payments throughout the life of the contract (10 years), adjusted for time.

He has a $68M payment due in 2034 which he accrued in 2024. That 68M is converted from 2034 dollars to 2024 dollars for taxing purposes (annual compound interest) to get a 44M salary (plus the 2M he is actually paid in 2024 to arrive at the 46M tax hit). That same calculation is used for each 10-year deferment.

I am not an accountant, but this is the general strategy used. It is the same basic strategy used with Bonilla. Bonilla was owed 8M by the Mets. He converted that into an annuity that would not start paying for about 15 years, then would begin paying for 25 years. The 8M principle was earning 8% interests for the initial 15 years, then the remaining balance continued earning interest each year until it is completely paid, thus causing an 8M initial investment turning into 25 payments of 1M. It wasn’t that difficult for anyone who knows anything about finances.

 

[wazzu31]

The deferment schedule has nothing to do with the tax implementations (MLB, not California). For the tax implications, the payments are essentially assumed to be paid in full, in equal payments throughout the life of the contract (10 years), adjusted for time.

He has a $68M payment due in 2034 which he accrued in 2024. That 68M is converted from 2034 dollars to 2024 dollars for taxing purposes (annual compound interest) to get a 44M salary (plus the 2M he is actually paid in 2024 to arrive at the 46M tax hit). That same calculation is used for each 10-year deferment.

I am not an accountant, but this is the general strategy used. It is the same basic strategy used with Bonilla. Bonilla was owed 8M by the Mets. He converted that into an annuity that would not start paying for about 15 years, then would begin paying for 25 years. The 8M principle was earning 8% interests for the initial 15 years, then the remaining balance continued earning interest each year until it is completely paid, thus causing an 8M initial investment turning into 25 payments of 1M. It wasn’t that difficult for anyone who knows anything about finances.

I don’t give a shit about California taxes. I am talking during the 10 year contract, the Dodgers CBT calculation should be 70 million annually. Had Bobby Bonilla signed his contract when the union agreed to a CBT then that’s a different story, it was grandfathered in. It goes against all that union agreed on the intent of the the CBT. It was designed for the teams that go over to pay the cheap owners and they were suppose to spend it to overpay for free agents. With this deferral not counting and a lot teams refusing to increase their payroll to outpace inflation the CBT is pointless

 

[calsnowskier]

I don’t give a shit about California taxes. I am talking during the 10 year contract, the Dodgers CBT calculation should be 70 million annually. Had Bobby Bonilla signed his contract when the union agreed to a CBT then that’s a different story, it was grandfathered in. It goes against all that union agreed on the intent of the the CBT. It was designed for the teams that go over to pay the cheap owners and they were suppose to spend it to overpay for free agents. With this deferral not counting and a lot teams refusing to increase their payroll to outpace inflation the CBT is pointless

I only mentioned California to be clear that I was NOT talking about California taxes, but I WAS talking about baseball taxes.

Ohtani is not getting paid 70M per year by the doggies, though. He is getting paid approx 46M per year. The additional 24M is interest that the 44M earns while it sits in a back account, untouched, for 10 years.

 

[RobToxin]

As long as the Dodgers fail in the playoffs again, they can pay him 7 billion dollars for all I care.

It's not my money.