The Dodgers built a championship roster in 2024 thanks in large part to a specific contract clause given to Mookie Betts, Freddie Freeman, Shohei Ohtani and Will Smith. Each player has a portion of their annual salary deferred until after their contract expires.
The #Dodgers have now secured $964M of deferred payments since July 2020.
Shohei Ohtani: $680M/$700M
Mookie Betts: $115M/$365M
Blake Snell: $62M/$182M
Freddie Freeman: $57M/$162M
Will Smith: $50M/$140M — Spotrac (@spotrac) November 27, 2024
Why would the Dodgers choose to defer more than $900 million in present-day contract obligations to players who are no longer on their active roster? Several reasons stand out:
The Dodgers’ owners can pocket the deferred money owed to Ohtani, Betts, Freeman, Smith, Snell, and now Tommy Edman, invest it in one of their preferred vehicles, and have more money to pay their players when the checks come due.
Deferring money lowers the present-day value of a contract, which is directly tied to the team’s competitive balance tax calculation. Ohtani’s contract, for example, is for 10 years and $700 million, but the team is assessed a tax on only $46 million each year of the contract (based on its present-day value of $460,767,680 under the formula required by baseball’s Collective Bargaining Agreement).
Players who live and work in California, where high earners face the largest income tax rates in the country, can pay lower tax rates on their deferred salaries simply by moving out of state — a point that helps the Dodgers, and the other four California-based MLB teams, when negotiating salary terms with free agents.
Former Angels pitcher Jered Weaver articulated the latter point on his Twitter/X account Saturday.
Everyone complaining about this deferred money situation w the dodgers… makes it easier to sign knowing you won’t pay Cali taxes on all your money.. might be onto something obviously — Jered Weaver (@Weave1036) December 1, 2024
As Weaver notes, there is a controversy around the practice of teams deferring players’ salaries. Many fans have called it a