01/23/2024
From the article:
//
Baseball star Shohei Ohtani, a rare hitter-pitcher, could have signed with the New York Yankees or Toronto Blue Jays but opted for a record-breaking $700 million contract with the Los Angeles Dodgers. Fans might think Ohtani’s choice to stay in California would delight state officials, but that is not the case.
To give his team more flexibility with other players, Ohtani deferred all but $2 million of his annual $70 million salary. That fell afoul of California’s State Controller, Democrat Malia Cohen.
“The current tax system allows for unlimited deferrals for those fortunate enough to be in the highest tax brackets, creating a significant imbalance in the tax structure,” Cohen contends.
“The absence of reasonable caps on deferral for the wealthiest individuals exacerbates income inequality and hinders the fair distribution of taxes. I would urge Congress to take immediate and decisive action to rectify this imbalance.”
Cohen is right that there is a “significant imbalance” in the tax structure. In California’s punitive system, those in the highest bracket pay 13.30 percent. California also imposes an 8.84 corporate income tax rate, and a 7.25 state sales tax rate.
The Controller wants to get her hands on as much of Ohtani’s money as possible so the state can “distribute” the revenue in a way she regards as “fair.” As fans should know, the state’s pillage people have other means of extraction.
Under the “jock tax,” California shakes down athletes for their “duty days” in California during the season. In 2016, when the Super Bowl was played in Santa Clara, the state raked in $1 million for a single day and the extended duty days cost Payton Manning more than his entire Super Bowl winnings.
Athletes, business owners and workers alike seek relief in states such as Florida, which imposes no income tax. That ongoing exodus also disturbs state officials.
Oakland Democrat Rob Bonta was the prime mover of AB 2088, the California Wealth Tax, which would have slapped a 0.4 percent tax on the portion of a taxpayer’s net worth that exceeded $30 million. AB 2088 would have taxed former Californians 90 percent of their in-state levy in the first year after they left the state and 80 percent in the second year, phasing out over a decade.
The Yale law alum Bonta, now state Attorney General, believed it was legal to keep taxing non-residents for ten years. Consider also the case of Gilbert Hyatt, inventor of the first single-chip microprocessor back in 1990. Hyatt decamped to Nevada, which does not levy income tax. California’s Franchise Tax Board claimed the inventor lied about his residency and socked him with a bill of $13.3 million in back taxes and penalties.
Hyatt sued the FTB for harassment, fraud, and invasion of privacy. The battle continued until 2019, when a court ruling left Hyatt with a 1991 tax bill of $1.9 million, including interest. The ruling failed to send any new tax revenue to California and revealed that over 26 years the FTB spent $25 million in pursuit of the inventor.
Gilbert Hyatt earned his money by inventing a useful product that people wanted to buy. The same principle applies to athletes such as Shohei Ohtani, whose hitting and pitching skills are such that people will pay to see him.
Ohtani earns approximately $40 million from endorsement deals in America and Japan. That comes on top of his $30 million salary, and makes it possible for him to defer all but $2 million of his salary in the 10-year deal with the Dodgers.
Shohei Ohtani is a model of free choice. California is a model of government greed.
//
Shohei Ohtani is a model of free choice. California is a model of government greed.