This state senator tried to curb the Dodgers’ deferral ‘loophole.’ So far, no luck
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The Houston Astros are hated because they cheated. The Dodgers are not cheating. Outside Los Angeles, however, they are hated a little more every day.
The supply of money appears endless. So does the line of All-Stars. But the deferred contracts are what might irk the haters the most.
The defending World Series champions have fortified their roster with a series of “play now, pay later” deals, all in accordance with the collective bargaining agreement, all giving the Dodgers a modest break on their luxury taxes. And so, the haters ask, can someone please stop the Dodgers?
Josh Becker would like to. He is a California senator, a Democrat from Menlo Park. The Dodgers have deferred more than $1 billion in salary over the last five years. Every dollar of salary deferred could be a dollar the state cannot tax.
“The Dodgers are exploiting that loophole,” Becker told me. “It was never intended to be for anything remotely like this.”
The loophole is this: Under federal law, if you earn your salary in one state and retire elsewhere, you may not need to pay income taxes on the salary you defer for retirement.
The Dodgers’ ability to put off long-term payments while reaping short-term benefits is raising new fears about a competitive imbalance in a sport already lacking league-wide parity.
That puts California at risk of losing up to $138 million in revenue because of the Dodgers’ deferrals — $90 million on Ohtani’s contract alone, should he return to Japan or move to another state after his deal expires.
“He’s exploiting something that was meant to be for people with pensions of $20,000 or $25,000 … people who have a small amount of pension, later in life, as actual retirement,” Becker said. “That’s what it was meant to be.
“We set up a system. Other people abide by it. And you’re basically dodging taxes that other people have to pay. It’s basic fairness.”
In December 2023, the Dodgers signed Ohtani to a 10-year, $700-million contract, with $680 million deferred beyond the life of the contract. Four weeks later, state controller Malia Cohen said the contract illustrated the need for Congress to limit how much money could be deferred without being subject to taxes.
“This action would not only create a more equitable tax system,” Cohen said in a statement, “but also generate additional revenue that can be directed towards addressing pressing important social issues and fostering economic stability.”
Last March, Becker introduced a bill that urged Congress to “establish a reasonable cap on deferred compensation.” The first line of the bill: “WHEREAS, In December 2023, the Los Angeles Dodgers baseball team signed a 10-year, $700,000,000 contract with pitcher and hitter Shohei Ohtani.”
The bill cleared the state senate but died in the assembly; Becker withdrew the bill once he realized it would not pass.
Some residents began to assess the damage to their homes as firefighters appeared to turn a corner in containing the blazes. But officials warned there would be much work to be done.
California’s income tax rate for top earners is 13.3%, the highest in the country. It would make financial sense that players and others would retire to states like Florida and Texas, where there is no state income tax.
Among the concerns Becker said he heard about his bill: wealthy executives, not just ballplayers, benefit from such deferred compensation.
“They shouldn’t be using it either,” he said. “Let’s close the loophole.”
This is not just about Ohtani or the Dodgers, Becker said. This is about leveraging the attention on Ohtani and the Dodgers to try to reform tax law.
Becker said he may introduce his bill again. His timing could be better. The bill basically asks Congress to make some people pay more in taxes. There is a better chance the Colorado Rockies win the World Series this year than Congress would pass — and President Trump would sign — such a bill.
“If anything, they’re focused on cutting corporate taxes, rather than having people pay their fair share,” Becker said.
Becker represents a district in San Francisco Giants territory but grew up in Philadelphia and remains a Phillies fan. He does not really blame the Dodgers. He blames Congress. Shhhh, but he kind of admires the Dodgers.
“The Dodgers,” he said, “are building a little bit of a dynasty there.”
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