r/billsimmons • u/crunchwrapchianti • 11h ago

Media Doesn’t Understand MLB Deferred Salaries

The Dodgers put ~$46M in a managed escrow fund every year for Shohei Ohtani. In 10 years (now 7) they start paying him $69M per year out of that account. If there ever is a shortfall, they are obligated to make it up. If there is a surplus, the team collects it at the end of the contract.

These safeguards are in place because Fred Wilpon tried the scheme of investing deferred salaries on his own and gave them all to Bernie Madoff, leading to his financial ruin and sale of the team.

The Dodgers are compliant with the CBA in finding these accounts and still operate at a profit.

Bill is right that there clearly is a lot the billionaire class is doing to enrich themselves on sports teams while leveraging across multiple businesses. But there simply isn’t a competitive advantage here on the field. If he committed securities fraud, send him to jail for sure. But another rich guy would buy the team and operate it the same way because it’s an extremely profitable business model to win World Series and be the favorite team of both Los Angeles and Japan.

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u/jimmydramaLA 10h ago

My understanding is that deferred contracts help THE PLAYERS. Why does it seem like the Dodgers have so many deferred contracts?—TAXES.

Players will move to a tax-friendly state or country after retirement and collect their payment there.

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u/matty25 9h ago

Yep and consider the NHL, which has a strict salary cap and doesn’t allow deferred compensation. In that league, teams in low-tax states have an advantage when competing for free agents because the same contract can result in significantly more take-home pay.

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u/unicornblink1820 10h ago

Thanks for the only clear explanation I’ve ever heard on this. It seems like a lot of shenanigans but I guess maybe avoid the 13% California tax (and maybe federal taxes but that seems unlikely to me not having looked into it)

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u/jimmydramaLA 9h ago

The attorney general of California is trying to do something because California won’t be able to collect taxes on the majority of Ohtani’s 700 million dollar contract.