Becker Legislation to close the Shohei Ohtani tax loophole passes key Senate Committee

SJR 14 calls on Congress to close the tax loophole that allowed LA Dodgers player Shohei Ohtani to avoid paying approximately $90 million in state taxes.

SACRAMENTO, CA–Today the Senate Committee on Revenue and Taxation approved SJR 14, authored by state Senator Josh Becker (D-Menlo Park), which calls on Congress to close a loophole that allows Los Angeles Dodgers player Shohei Ohtani to potentially evade a $90 million in state taxes on his $700 million dollar contract by deferring his compensation.

“It is disturbing that Shohei Ohtani and other individuals can perform a hidden ball trick using an obscure tax loophole to avoid paying hundreds of millions of dollars and it's a concerning precedent,” said Becker. “The current system exacerbates the unequal distribution of taxes and creates an unbalanced tax structure and further perpetuates income inequality. SJR 14 calls on Congress to make wealthy individuals pay a fairer and more equitable share of taxes like the rest of us.”

In December, the Los Angeles Dodgers baseball team signed a ten year, $700 million contract with pitcher and hitter Shohei Ohtani. That current contract is structured so that Ohtani will defer $68 million dollars annually, only receiving $2 million per year for ten years and potentially allow Ohtani to avoid paying over $90 million in state taxes, if he were to reside out of California when the deferred compensation is paid. This process of deferred compensation is allowed under current federal law and conforming state law, letting high income earners have unlimited deferrals of compensation, and creating an unbalanced tax structure and income inequality.

The absence of a cap deferring compensation for high income earners has created further repercussions for the fair distribution of taxes. Potential limits on deferred compensation for high income earners can establish an equitable tax system for all and maintain potential state revenue.

SJR 14 urges Congress to establish a reasonable cap on deferred compensation to rectify this imbalance and create a more equitable tax system for all. It is sponsored by California State Controller Malia M. Cohen.