Wow

[Raisin Bran]

These deferred payments really tick me off. Doesn’t seem like it should be allowed and is a serious work around the luxury tax which defeats the purpose of the luxury tax.

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Yep! It’s not the players! It’s the greedy owners always trying to steal more!

 

[seeth07]

These deferred payments really tick me off. Doesn’t seem like it should be allowed and is a serious work around the luxury tax which defeats the purpose of the luxury tax.

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Maybe you don't understand how it works.

It will provide them some luxury tax relief now but it's penalized. I believe for Ohtani, rather than a cap of 70, it's viewed at 46 for the luxury tax.

Then when the deferred payments are made, they still have to pay luxury tax then on that salary being paid

 

[SC Living Outdoors]

Maybe you don't understand how it works.

It will provide them some luxury tax relief now but it's penalized. I believe for Ohtani, rather than a cap of 70, it's viewed at 46 for the luxury tax.

Then when the deferred payments are made, they still have to pay luxury tax then on that salary being paid

I understand how it works. I am a diehard Braves fan. I kind of nerd out over the Bravos.

What frustrates me the most is the Dodgers get some relief. No team should. I don't care if you want to pay a player a billion dollars a year you should have to pay them and whatever rules/taxes/penalties that are agreed upon should be followed. Which I guess they aren't technically breaking any rules, but its just wrong. I know darn well that in 15 years that 68M a year isn't going to be the same. Payrolls will be 500M a year or more so that 68M wont be as much to swallow. Last year when Cohen was shelling out insane money to build the Mets I wasn't upset. I thought it was crazy, but it didn't seem underhanded or shady. He was trying to build a good team so he said I'll pay it and pay the tax. That's how it should be. What the Dodgers are doing is different imo.

Atleast my team is spending some money. It really really sucks for the smaller market teams. Id be all for a hard salary cap, but I know that'll never happen with the MLBPA.

 

[seeth07]

I understand how it works. I am a diehard Braves fan. I kind of nerd out over the Bravos.

What frustrates me the most is the Dodgers get some relief. No team should. I don't care if you want to pay a player a billion dollars a year you should have to pay them and whatever rules/taxes/penalties that are agreed upon should be followed. Which I guess they aren't technically breaking any rules, but its just wrong. I know darn well that in 15 years that 68M a year isn't going to be the same. Payrolls will be 500M a year or more so that 68M wont be as much to swallow. Last year when Cohen was shelling out insane money to build the Mets I wasn't upset. I thought it was crazy, but it didn't seem underhanded or shady. He was trying to build a good team so he said I'll pay it and pay the tax. That's how it should be. What the Dodgers are doing is different imo.

Atleast my team is spending some money. It really really sucks for the smaller market teams. Id be all for a hard salary cap, but I know that'll never happen with the MLBPA.

I get that due to inflation, the 68 mil per year will not be the same when this is all said and done 20 years from now. However, the penalty is massive to the Dodgers for doing this because for an entire decade post Ohtani, they will have 68M on the books.

70M that you pay the Luxury tax on for 10 years vs paying 46M for 10 years and then 68M for 10 years.

I honestly can't believe the Dodgers agreed to this.

 

[Oak]

What is the luxury tax threshold going to be when they start paying deferred money? Current thresholds:

2022: $230 million
2023: $233 million
2024: $237 million
2025: $241 million
2026: $244 million

Those will be renegotiated in the next CBA, so to @SCliving Outdoors point, $68m isn't going to be quite the pill to swallow in 2034.

 

[Deleted member 16014]

When those luxury tax increases hit it can make a big difference. It's the primary reason Golden State got to cram Durant into the payroll with Curry, Thompson, and Green in 2016. I think the new NBA luxury tax aprons with huge management and draft penalties are interesting. I'll be curious to see it play out, as it relates to all pro sports.

 

[Letthemgrow]

Maybe you don't understand how it works.

It will provide them some luxury tax relief now but it's penalized. I believe for Ohtani, rather than a cap of 70, it's viewed at 46 for the luxury tax.

Then when the deferred payments are made, they still have to pay luxury tax then on that salary being paid

I don't belive that is true.
They are paying the contract's tax in each of the next 10 years based on AAV.
Those future payments of $68 million will obviously have to be paid, but they do not count against that year's CBT.
That's why other teams are so pissed off.

 

[Oak]

I don't belive that is true.
They are paying the contract's tax in each of the next 10 years based on AAV.
Those future payments of $68 million will obviously have to be paid, but they do not count against that year's CBT.
That's why other teams are so pissed off.

Did a little more reading on this, and you're right. There will be no CBT impact during the years the deferred money is paid. It's all paid during the course of of the contract, based on AAV as you said. Money deferred outside the term of the contract is calculated using its present-day value. Because the value of a dollar decreases over time, the contract has a present-day value of roughly $460 million for the purposes of the CBT. So the CBT impact for the next 10 years will be $46 million instead of $70 million if none of the money was deferred.

 

[seeth07]

Did a little more reading on this, and you're right. There will be no CBT impact during the years the deferred money is paid. It's all paid during the course of of the contract, based on AAV as you said. Money deferred outside the term of the contract is calculated using its present-day value. Because the value of a dollar decreases over time, the contract has a present-day value of roughly $460 million for the purposes of the CBT. So the CBT impact for the next 10 years will be $46 million instead of $70 million if none of the money was deferred.

We must have read the same article over lunch...

MLB Matters: Understanding Deferred Money Contracts - Metsmerized Online

Why I Started Looking At Deferred Contracts The running joke by many baseball writers, fans, and TV networks was the deferred contract the Mets agreed to give Bobby Bonilla. Instead of simply laugh, I decided to dig deeper into his contract and deferred contracts in-general. I realized that the...

metsmerizedonline.com

That article really goes into it and by the end of reading it you understand why Ohtani's contract is so high. Ohtani could have accepted a contract at 460M over 10 years or he could ensure himself a flat guarantee invested additional 240M rather than try to figure it out himself how to invest it and get the same return.