Re: Shohei Ohtani to LA Dodgers

Originally Posted by
2014olympicgold
I wonder how much he'll save in taxes with this move though. He'd likely not be living in California from years 2033-43 when he's earning the bulk of his deal. (I have never taken a lick of accounting classes, even in highschool)
Just quick math but his current deal when just thinking about taxes:
2024-2033: $2m/yr or $1,000,720 ---- $10,007,200 (In LA)
2034-43: $68m/yr or $40,100,874 ---- $401,008,740 (In Texas)
Total over 20years: $411,015,940
2024-2033: $70m/yr or $33,198,720 --- $331,987,200 (in LA)
So by deferring he earns like $79m more, and that's if he stays in the US, I'm sure the taxes are different in Japan.
So you're saying he's essentially making $40m/yr, I'm thinking he's making (after taxes) $20,550,797 (deferred) or $16,599,360 (not deferred, but over 20yrs still).
I guess the thing is, would you rather your money upfront to invest it, or know you're making enough money off the field to invest properly, and take a ton of money coming in when you retire. I'd personally would be very intrigued at this model if I'm making any money off field.
Taxes are an interesting angle as well.
If Ohtani retires at the end of the deal (or further defers money until retirement) and immediately moves to a low tax-state (like Texas), or, moves to a tax haven (Monaco, Virgin Islands) he could potentially save A TON of money which could then tip the scales in favor of deferment.
I'm also sure the IRS and California equivalent would have something to say about that. They would want to tax the funds, which were earned in California, as if Ohtani lived in California.
Reading through the accounting subreddit on reddit, the posters are in disagreement on whether Ohtani can avoid California state tax or not (assuming he moves out of California).
You would still need to discount the dollars received (in Texas) in years 11-20 and compare that to higher taxed California dollars in years 1-10 to get an apples to apples comparison. California State tax is up to 13.3%, Texas/Florida is 0% (federal is the same).
From an accounting perspective you would always prefer the money upfront. If you're an Allen Iverson and don't trust yourself to not go broke, then take the money upfront and lock it in a trust away from yourself, but you earn the interest. Ohtani does not need $70million/year + his endorsements, but investing the $70million over years 1-10 vs. not is the whole point of net present value calculations.
Comparing $700mil NOW in California (years 1-10), to $20mil-Cal (1-10), $680m-Texas (11-20) makes the numbers closer
(and ignoring all other state and local taxes for simplicity):
No Deferment
Ohtani makes $70 million x 10 seasons, in California his after-tax pay is $34,858,623 in years 1-10 NPV is $256,362,499
Deferment - Year 11 moves to Texas (0% state tax)
Ohtani makes
Years 1-10 $2million - after all taxes (13.3% California income tax) - $1,062,623 - NPV $7,820,997
Years 11-20 $68million - Texas (0% state income tax) $42,881,837 - NPV - $184,058,236
Total NPV of Contract with Deferments $191,879,233
Ohtani Moves to Virgin Islands - Pays no US Federal Tax
I highly doubt there is any chance this would be successful, but for the sake of argument let's say in Year 11 Ohtani moves to the Virgin Islands, and pays 0% income tax
Years 1-10 $2million - after all taxes (13.3% California income tax) - $1,062,623 - NPV $7,820,997
Years 11-20 $68million - Virgin Islands - $68,000,000 - [B]NPV - $287,688,391.70/B]
Total NPV of moving to Virgin Islands $295,509,388.70
12 team H-2-H 1 year league, daily roster changes, 3 goalie start minimum/week
2xC, 2xRW, 2xLW, 4xD, 3xUtil, 2xG, 5 Bench
G, A, P, PIM, PPP, SHP, GWG, SOG, Hits, W, SV%, GAA, SVs
C: A. Matthews, JT Miller, T. Thompson, B. Nelson, PL Dubois, D. Strome, T. Zegras
LW: F. Forsberg, J. Robertson, K. Fiala, A. Lafreniere(NYR),
RW: A. Kempe, C. Giroux,
D: R. Dahlin, M. Weegar, D. Nurse, N. Dobson
G: S. Bobrovsky, C. Talbot, J. Daccord
NO IR