California State Controller Malia Cohen Wants Cap On Contract Deferrals Amid Concern Over Future Revenue

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Shohei Ohtani’s 10-year, $700 million contract with the Los Angeles Dodgers includes unprecedented deferrals that will see him earn just $20 million over the length of the deal. The remaining $680 million will be paid out annually from 2034-2043.

The unique contract structure was proposed by Ohtani as a way for the Dodgers to continue adding talent around him. The team has used the savings to sign Yoshinobu Yamamoto, Tyler Glasnow and reportedly Teoscar Hernández for a combined $485 million.

While Ohtani’s contract was designed to benefit the Dodgers, fans of other teams believe it puts them at an unfair advantage.

California State Controller Malia M. Cohen also noted that the contract could start of trend of athletes taking similar deals and paying less in taxes, per Mike Hagerty of CapRadio:

“It comes at a time when we are dealing with a $68 billion dollar deficit here in the state of California,” Cohen said. “And so, I’m waving the flag because as the state Controller and also chair of the Franchise Tax Board, I’m concerned. I’m concerned about the impact on future California revenues.”

Cohen, a native of San Francisco, is calling on Congress to consider a tax reform that would prohibit deferring massive amounts of income:

“Don’t get me wrong, I’m a sports fan and I wish Ohtani and the Dodgers well — however, full disclosure, I am a Giants fan,” Cohen said. “I just think that there should be a cap on deferrals … just like there are limitations for everyday taxpayers.”

Cohen added her stance is more about future contracts as not much can be done about Ohtani’s deal with the Dodgers:

She acknowledged there’s not much that can be done about the Ohtani deal, so any reforms would be aimed at protecting tax revenue against future contracts.

As the chief fiscal officer of California, Cohen is responsible for accountability and disbursement of the state’s financial resources.

With California facing a huge deficit, she believes it is important to get ahead of the issue now and not let it become a bigger problem for the state government.

Maria M. Cohen statement on Shohei Ohtani contract with Dodgers

Cohen released a statement on Ohtani’s contract, pointing out that he could hypothetically return to Japan after his playing career and not pay taxes to the state on most of his income.

“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.” Cohen said.

“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.”

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