Please ensure Javascript is enabled for purposes of website accessibility
Will Juan Soto Top Shohei Ohtani's Deal? It Depends on the Accounting Tricks
gvw_ap_news
By Associated Press
Published 4 months ago on
December 6, 2024

New York Yankees' Juan Soto celebrates after hitting a home run against the Los Angeles Dodgers during the third inning in Game 2 of the baseball World Series, Saturday, Oct. 26, 2024, in Los Angeles. (AP/Godofredo A. Vásquez)

Share

Getting your Trinity Audio player ready...

NEW YORK — Deciding whether Juan Soto tops Shohei Ohtani for baseball’s largest contract could be in the eye of the beholder because of all the deferred money in Ohtani’s deal.

Ohtani agreed last December to a $700 million, 10-year deal with the Los Angeles Dodgers, easily exceeding the previous high set when Mike Trout and the Los Angeles Angels struck a $426.5 million, 12-year agreement through 2030.

Ohtani’s deal includes $680 million in deferred money payable from 2034-43. There are several interpretations for how to value that deal in current dollars:

1. For baseball’s luxury tax, the average annual value is pegged at $46.08 million using a 4.33% discount rate.

2. The players’ association uses a 5% rate, which puts the value at $43.75 million per season.

3. For MLB’s regular payroll, a 10% rate results in a $28.21 million per year rate.

Soto could get a contract of 10-to-15 years for $600 million or more.

His agent, Scott Boras, is not a big fan of deferred money and thinks teams might not insist on delaying the cash.

“I think it’s much less of an issue than it was before,” Boras said. “Deferral as a mechanism for me, is it: Will it impede my ability to get the greatest asset I can acquire? And the answer to that is I don’t think they’re going to want to do anything that impedes their primary pursuit and goal.”

Calculating Luxury Tax Value

The interest figure used for discounting to determine luxury tax value is set in the collective bargaining agreement as the federal mid-term rate defined in section 1274(d) of the Internal Revenue Code for the October preceding the initial contract year.

That rate dropped to 3.7% this offseason, which meant if Ohtani’s deal had been agreed to this month, its annual luxury tax value would have been about $49.3 million. That would have resulted in an additional $3.5 million annual tax bill for the Dodgers, who will exceed the top threshold and would pay additional tax at a 110% rate on each dollar.

MLB’s regular payrolls, which use the same rate as the one for calculating the qualifying offer price based on the 125 largest contracts, use the prime rate set by J.P. Morgan Chase on the preceding Nov. 1 plus 1%, rounded to the nearest full percentage point. That figure dropped to 9% for this offseason.

Deferred compensation must be funded by the second July 1 after the season in which it was earned, discounted to a present-day value at a 5% rate.

Teams’ Approach to Deferred Money

Los Angeles owes deferred payments just over $1 billion due from 2028-46 to Ohtani, Mookie Betts, Freddie Freeman, Will Smith, Teoscar Hernández, Blake Snell and Tommy Edman.

“It’s just trying to kick dollars down the road,” St. Louis Cardinals president of baseball operations John Mozeliak said at the general managers meetings last month.

Ohtani’s payments are two-thirds of the total owed.

“It was a unique situation for where a club was, a unique situation for a player who has very significant earning potential outside of strictly his compensation from a club,” New York Mets president of baseball operations David Stearns said. “Those other ones are much more representative of what you see in sort of standard contracts around the industry. Each organization, each ownership group is going to have a slightly different perspective on this, on how they’re calculating the returns off of that deferred compensation.”

Dodgers president of baseball operations Andrew Friedman said his team’s leadership from Guggenheim Baseball Management has the expertise to fund deferred compensation wisely.

“A lot of our ownership group are from financial background and can have that money going to work right now,” he said.

MLB’s Stance on Deferred Compensation

MLB proposed during collective bargaining on June 21, 2021, to put an end to the practice.

“For contracts entered into after the effective date of the Basic Agreement, deferred compensation of any kind will not be permitted,” the proposal read, according to a copy obtained by The Associated Press.

That idea was rejected by the union and not included in the five-year agreement that expires in December 2026.

New York Yankees general manager Brian Cashman thinks his team’s large resources encourage players to seek their money as soon as possible.

“We’re open to deferrals,” he said. “A lot of times players are less open to doing deferrals for us than they are for maybe other markets, but if we can do stuff that benefits us, of course we will.”

RELATED TOPICS:

DON'T MISS

Wired Wednesday: CEMEX’s New Mining Plan for the San Joaquin River

DON'T MISS

Trump Fires NSC Officials a Day After Far-Right Activist Raises Concerns to Him

DON'T MISS

China Halts Approvals for New US Investment Projects

DON'T MISS

Measles Spreads to Central Texas; 5 States Have Active Outbreaks

DON'T MISS

Trump Tariff Fears Erase $2 Trillion From US Stocks

DON'T MISS

Startup Offers Controversial Microplastic Blood Cleansing Treatment

DON'T MISS

Senate Confirms Mehmet Oz to Take Lead of Medicare and Medicaid Agency

DON'T MISS

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

DON'T MISS

Pence Will Receive the Profile in Courage Award From the JFK Library for His Actions on Jan. 6

DON'T MISS

Politics Turns Ugly for a Conservative Running for Fresno State Student Body President

UP NEXT

Trump Fires NSC Officials a Day After Far-Right Activist Raises Concerns to Him

UP NEXT

China Halts Approvals for New US Investment Projects

UP NEXT

Measles Spreads to Central Texas; 5 States Have Active Outbreaks

UP NEXT

Trump Tariff Fears Erase $2 Trillion From US Stocks

UP NEXT

Startup Offers Controversial Microplastic Blood Cleansing Treatment

UP NEXT

Senate Confirms Mehmet Oz to Take Lead of Medicare and Medicaid Agency

UP NEXT

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

UP NEXT

Pence Will Receive the Profile in Courage Award From the JFK Library for His Actions on Jan. 6

UP NEXT

Pentagon’s Watchdog to Review Hegseth’s Use of Signal App to Convey Plans for Houthi Strike

UP NEXT

President Trump’s Tariffs Could Be the Political Tipping Point

Measles Spreads to Central Texas; 5 States Have Active Outbreaks

12 hours ago

Trump Tariff Fears Erase $2 Trillion From US Stocks

12 hours ago

Startup Offers Controversial Microplastic Blood Cleansing Treatment

12 hours ago

Senate Confirms Mehmet Oz to Take Lead of Medicare and Medicaid Agency

13 hours ago

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

15 hours ago

Pence Will Receive the Profile in Courage Award From the JFK Library for His Actions on Jan. 6

15 hours ago

Politics Turns Ugly for a Conservative Running for Fresno State Student Body President

15 hours ago

Pentagon’s Watchdog to Review Hegseth’s Use of Signal App to Convey Plans for Houthi Strike

15 hours ago

President Trump’s Tariffs Could Be the Political Tipping Point

16 hours ago

Order That Kept Water in the Kern River Reversed by 5th District Court of Appeal

17 hours ago

Wired Wednesday: CEMEX’s New Mining Plan for the San Joaquin River

GV Wire’s Edward Smith talks with KMPH Fox 26 “Great Day” anchor Christina Rodriguez about the possibility of CEMEX digging a 600-foot hole ...

10 hours ago

10 hours ago

Wired Wednesday: CEMEX’s New Mining Plan for the San Joaquin River

President Donald Trump speaks during an event to announce new tariffs in the Rose Garden at the White House, Wednesday, April 2, 2025, in Washington. (AP/Mark Schiefelbein)
11 hours ago

Trump Fires NSC Officials a Day After Far-Right Activist Raises Concerns to Him

11 hours ago

China Halts Approvals for New US Investment Projects

12 hours ago

Measles Spreads to Central Texas; 5 States Have Active Outbreaks

12 hours ago

Trump Tariff Fears Erase $2 Trillion From US Stocks

12 hours ago

Startup Offers Controversial Microplastic Blood Cleansing Treatment

Dr. Mehmet Oz, President Donald Trump's pick to lead the Centers for Medicare and Medicaid Services, seated right, gives a thumbs-up alongside his wife Lisa Oz, seated left, with friends and family after he testified at his confirmation hearing before the Senate Finance Committee, on Capitol Hill in Washington, Friday, March 14, 2025. (AP/Ben Curtis)
13 hours ago

Senate Confirms Mehmet Oz to Take Lead of Medicare and Medicaid Agency

15 hours ago

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

Help continue the work that gets you the news that matters most.

Search

Send this to a friend