California Controller Malia M. Cohen seeks to limit deferred earnings in Shohei Ohtani’s contract with the Los Angeles Dodgers in order to collect more taxes
California’s Controller, Malia M. Cohen, urged Congress to cap deferred payments to ensure that the state collects more taxes from Shohei Ohtani’s $700 million contract with the Los Angeles Dodgers. Ohtani’s contract includes $680 million in deferred payments from 2034-2043. However, if Ohtani is not living in California at the time he receives the deferred money, he could avoid the state’s 13.3% income tax and 1.1% payroll tax for State Disability Insurance.
Cohen expressed concern that unlimited deferrals for high-income earners create an imbalance in the tax structure, contributing to income inequality. If Ohtani’s deal has the potential to save $98 million in state tax, it could cause a significant loss in revenue. Cohen proposes introducing limits on deductions and exemptions for high-income earners to promote social responsibility and contribute to a just and beneficial tax system for all.
While Cohen is pushing for these changes, some experts argue that enforcing deferred income restrictions might not be beneficial for the state’s revenue collection. They cite a federal law enacted in the 1990s that prevents states from taxing nonresident “retirement income,” which includes deferrals.
Overall, Cohen’s push for changes in tax law highlights the complexities surrounding high-income earners’ contracts and the tax implications for the state of California.