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The full episode, in writing.
On December 11, 2023, Shohei Ohtani signed a ten-year, seven hundred million dollar contract with the Los Angeles Dodgers. It was the largest contract in the history of professional sports — passing Lionel Messi's Barcelona deal, Patrick Mahomes' Chiefs extension, and Mike Trout's prior MLB record of $426.5 million. The headline number was the story for about six hours. Then The Athletic reported the structure: $680 million of the $700 million was deferred. From 2024 through 2033 — the entire ten years Ohtani plays for the Dodgers — he draws $2 million per year. The remaining $68 million per season starts paying out in 2034 and runs through 2043, with no interest accruing on the deferred balance.
Two million dollars a year is less than what the Dodgers' backup catcher makes. It is less than Ohtani earns in a single Porsche or Hugo Boss campaign — his off-field endorsements were estimated at roughly $100 million in 2025 alone, league-leading by a wide margin. He doesn't need the Dodgers' money to live, and the deferral lets him keep working for a contender.
The mechanism that makes this work is the competitive balance tax — MLB's soft salary cap. Under the collective bargaining agreement, deferred money is discounted to its present value when calculating a contract's average annual value for tax purposes. MLB used a discount rate of roughly 4.43 percent — the federal mid-term applicable rate at the time of signing. Apply that discount over a decade of delay and Ohtani's $70 million a year sticker AAV collapses to about $46 million for luxury tax purposes. The Dodgers carry the smaller number against the threshold, even though they're nominally on the hook for the full $700 million in nominal dollars.
That $24 million per year in cap relief is not abstract. Within seven weeks of signing Ohtani, the Dodgers added Yoshinobu Yamamoto — twelve years, $325 million, the largest contract ever for a pitcher. They added Tyler Glasnow on a five-year, $136.5 million extension. They added Teoscar Hernández on a one-year deal that became a two-year, $66 million extension after the 2024 World Series. The next winter they signed Blake Snell to a five-year, $182 million deal and Roki Sasaki — a Japanese pitching prodigy posted to MLB at age 23 — for a $6.5 million bonus. The roster that won the 2024 and 2025 World Series back to back was built on the headroom Ohtani's deferral created.
There is a cost to the team beyond the obvious. Starting in 2034, the Dodgers will write Ohtani a $68 million check every year for ten years — $680 million in nominal payments to a player who hasn't suited up for them in nearly a decade by that point. They are required by MLB rule to set aside money each year against that future obligation. Forbes estimated the Dodgers were funding a deferred-compensation reserve of roughly $46 million per season, the present value of each year's $68 million slice. The accounting works only if the franchise's enterprise value continues to compound — Sportico valued the Dodgers at $7.7 billion in 2025, second among MLB teams behind the Yankees, up from $5.5 billion when Ohtani signed.
The state of California has a quieter problem with the structure. California's top marginal income tax is 13.3 percent. If Ohtani receives his salary while playing in Los Angeles, that money is taxed in California — about $9 million per year on a $68 million check. But if he relocates to a no-income-tax state — Florida, Texas, Nevada — before the deferred money begins paying out in 2034, California cannot tax the deferred wages thanks to a 1996 federal law that protects retired players from being taxed by their former state. The California Franchise Tax Board could lose nine figures over the back half of the deal. Estimates put the lost revenue between $90 million and $98 million.
The Players Association approved the structure but flagged the precedent. MLB rules cap deferrals so the present value of the contract has to remain at least 50 percent of the nominal value — Ohtani's deal cleared that bar by a hair. Within months of his signing, the Dodgers themselves leaned harder on deferrals across the roster. Mookie Betts had already deferred $115 million of his prior $365 million extension. Freddie Freeman deferred $57 million of his $162 million deal. Will Smith signed a ten-year, $140 million extension in 2024 with $50 million deferred. Tommy Edman, Teoscar Hernández, and Blake Snell all included deferrals in their new contracts. The Dodgers' total deferred compensation obligations crossed $1 billion by the start of the 2025 season.
Other clubs flinched. The San Diego Padres' chairman Peter Seidler, before his death in November 2023, had publicly criticized large deferrals as "kicking the can." San Francisco Giants president Farhan Zaidi told reporters his front office considered but rejected the structure for Carlos Correa's failed 2022 deal. Atlanta and Houston routinely build extensions with no deferred money. The asymmetry is now baked into the league: a small number of high-revenue franchises with patient ownership can use long-tail deferrals to compound roster advantages that smaller-market teams structurally cannot match.
The Dodgers have already collected the return on the bet. They won the World Series in 2024 in five games over the Yankees and again in 2025 in seven over the Toronto Blue Jays — the first back-to-back titles in MLB since the 2000 Yankees. Ohtani won the National League MVP unanimously in both 2024 and 2025, his third and fourth MVP awards overall, and was named NLCS MVP in 2025 after pitching six shutout innings and hitting three home runs in a single game.