Shohei Ohtani’s record Dodgers contract — and deferrals — has California officials talking tax reform

The number was certainly attention grabbing: $700 million. 

That was the amount of money it took for the Los Angeles Dodgers to sign two-way baseball sensation Shohei Ohtani this December, the largest contract in North American sports history.

The contract caught the attention not just of sports fans but the person who signs the checks for California state workers, and now could be the catalyst for tax reform.

“This is big and I think if we continue to ignore it and allow it to persist, that it's going to become a very big problem for the state government,” said California state Controller Malia Cohen. “But we are going to need kind of an all hands on deck to begin to address this matter.”

The problem is that Ohtani’s 10-year contract pays him only $2 million a year, deferring $680 million until after his time with the Dodgers — and possibly his California residency — is over.

If Ohtani collects that money after returning to his native Japan, California would lose an estimated $98 million in tax revenue from him, according to Cohen.

"It comes at a time when we are dealing with a $68 billion dollar deficit here in the state of California,” Cohen said. “And so, I'm waving the flag because as the state Controller and also chair of the Franchise Tax Board, I'm concerned. I'm concerned about the impact on future California revenues." 

Cohen said she's calling on Congress to consider closing the loophole that allows massive amounts of deferred income because federal tax law supersedes state tax law. It has been part of employment contracts in varied fields for decades, but Cohen said her concern is that Ohtani's could start a wave of similar deals in sports. 

"Don't get me wrong, I'm a sports fan and I wish Ohtani and the Dodgers well — however, full disclosure, I am a Giants fan,” Cohen said. “I just think that there should be a cap on deferrals … just like there are limitations for everyday taxpayers." 

She acknowledged there's not much that can be done about the Ohtani deal, so any reforms would be aimed at protecting tax revenue against future contracts.