SACRAMENTO, Calif. (KABC) — Shohei Ohtani's contract with the Dodgers could potentially give him an unfair tax break, according to the California state comptroller.
In a statement released Monday, Controller Malia Cohen said Congress should close a loophole that could save Ohtani from paying tens of millions of dollars in taxes.
“The current tax system allows unlimited deferrals for those fortunate enough to be in the highest tax brackets, creating a significant imbalance in the tax structure,” Cohen said. “The lack of adequate deferral caps for the richest people exacerbates income inequality and hinders the fair distribution of taxes. I would urge Congress to take immediate and decisive action to address this imbalance.”
“Introducing limits on deductions and exemptions for high earners promotes social responsibility and contributes to a tax system that is fair and beneficial to all. This measure would not only create a fairer tax system, but also generate additional revenue that can be directed to help address pressing important societal issues and promote economic stability.”
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The Dodgers signed Ohtani to a 10-year, $700 million contract, with Ohtani deferring $680 million until the contract expires in 2033.
If Ohtani moves before then, it could cost the state an estimated $98 million in tax revenue.
“What we are seeing is that a billionaire can legally defer paying taxes on his income, which is fine. I say we need to look at this and put a cap in place,” Cohen said.
California's budget revenues rely heavily on high-income taxpayers like Ohtani. The budget finances essentials such as healthcare and education.
According to the California Center for Jobs and the Economy, the state has lost $5 billion over the past five years due to the exodus of high earners from California.
“When these high earners leave, our state budget takes a hit,” said Brooke Armour, president of the Center for Jobs. “In California, there are only about 8,000 taxpayers who pay about 24% of the state income tax. This is a huge burden for these people, and when they leave, we feel it.”
During Cohen's interview with ABC7, she suggested a cap of possibly 30% on these deferred payments.
“When you get super rich, rules are created to protect you, and I'm just saying that maybe we need to rethink those rules,” she said.
California currently has a $68 billion budget deficit. The Dodgers declined to comment at this time.