SACRAMENTO — State Controller Malia M. Cohen released the following statement following last month’s announcement that the L.A. Dodgers signed a 10-year, $700 million contract with pitcher Shohei Ohtani. The contract is structured so that Ohtani will receive $2 million per year and defer the balance approximately 10 years, when he could potentially return to Japan and escape payment of California state income taxes on the deferred amount:
“The current tax system allows for unlimited deferrals for those fortunate enough to be in the highest tax brackets, creating a significant imbalance in the tax structure.” said Cohen. “The absence of reasonable caps on deferral for the wealthiest individuals exacerbates income inequality and hinders the fair distribution of taxes. I would urge Congress to take immediate and decisive action to rectify this imbalance.”
“Introducing limits on deductions and exemptions for high-income earners promotes social responsibility and contributes to a tax system that is just and beneficial for all. This action would not only create a more equitable tax system, but also generate additional revenue that can be directed towards addressing pressing important social issues and fostering economic stability,” Cohen stated.
As the chief fiscal officer of California, Controller Cohen is responsible for accountability and disbursement of the state’s financial resources. The Controller has independent auditing authority over government agencies that spend state funds. She is a member of numerous financing authorities, and fiscal and financial oversight entities including the Franchise Tax Board. She also serves on the boards for the nation’s two largest public pension funds. Follow the Controller on X at @CAController and on Facebook at California State Controller’s Office.
Editors Note
The Los Angeles Dodgers announced the signing of Ohtani on Dec 11, 2023 and it was later announced he would be deferring $680 million of his contract for 10-years.
According to a CNBC article, the deal could provide tax benefits for Ohtani if he leaves California before receiving his deferred income, according to certified financial planner Eric Bronnenkant, head of tax at Betterment. For 2024, California’s top tax rate climbs to 14.4%, which includes a 1.1% payroll tax on all income. Bronnenkant said federal law protects nonresidents from taxes on “retirement income,” including payments structured for at least 10 years.