The Los Angeles Dodgers are in the news again, but this time it’s not for their on-field performance. After a nearly perfect offseason of retaining players and signing free agents the Dodgers have deferred over $1 billion in new contracts, and the criticism of MLB’s financial model is back. While the team’s strategy is legal under MLB rules, it’s sparking new debates about competitive balance and fairness in baseball.
How the Dodgers Built a Superteam with Deferred Money
What Are Contract Deferrals?
Contract deferrals allow teams to delay paying a big chunk of a player’s salary until after the contract ends. For luxury tax purposes a team’s payroll is calculated based on the average annual value (AAV) of each contract. By deferring salaries teams like the Dodgers can lower their competitive balance tax (CBT) liability.
For example Shohei Ohtani’s 10 year, $700 million deal has $680 million in deferred payments . That reduces his yearly salary for luxury tax purposes from $70 million to just $46 million, according to FanGraphs. The Dodgers have used this strategy more than any other team and account for roughly two-thirds of the $1.5 billion in known deferred money across MLB , according to Spotrac.
Why Do Teams Use Deferrals?
Deferrals provide immediate financial flexibility for teams to build superteams without going over payroll thresholds. The Dodgers one of the most financially successful franchises in MLB are uniquely positioned to take advantage of this system. With sold out crowds at Dodger Stadium, big media deals and global expansion the Dodgers can afford to push billions into the future.
“The Dodgers have been off the charts in terms of revenue generation for a very long time,” said David Carter, a sports business professor at USC. “Their market size and global reach give them the firepower to sign expensive but deferred contracts.”
The Players’ Perspective: Sacrificing Now for Future Success
While deferrals benefit teams by lowering tax bills players lose out by delaying payments. However many All-Stars accept these deals to help their teams build championship contenders. For example:
- Freddie Freeman and Mookie Betts deferred a combined $172 million before Ohtani’s deal.
- Players can offset some losses by negotiating signing bonuses which are taxed based on their state of residency not where they play games.
Deferred payments are considered retirement income under federal tax law so players can avoid state taxes if they move after they retire.
For example, Ohtani could save over $90 million in California taxes if he moves elsewhere after his contract ends.
Dodgers’ Strategy Criticism
“Buy Now, Pay Later”: Accused of Exploiting the System
The Dodgers’ extensive use of deferrals has drawn ire from fans and analysts. Critics say they’re avoiding the competitive balance tax and creating an uneven playing field. Social media sleuths called them out on Twitter, comparing the Dodgers to services like Klarna and saying they’re making MLB a “buy now, pay later” league.
“This is bad for the competitiveness of baseball,” said N. Jeremi Duru, a law professor and director of American University’s Sport & Society Initiative. “There’s a lot of concern that this approach eliminates parity in the sport.”
Even with deferrals, the Dodgers will still pay a league-high $142 million in luxury taxes in 2025 , so they’re willing to spend. But small market teams can’t compete, so what’s wrong with MLB’s revenue sharing?
The Bigger Picture: Is the MLB Financial Model Sustainable?
Revenue Disparities in MLB
MLB teams rely on regional sports networks (RSN) for revenue, but many RSNs are in financial trouble. The Dodgers have one of the most stable RSN deals in the league—a 25-year, $7–8 billion contract signed in 2013.
This stability allows them to invest in current and future talent. They’re also leading the charge in MLB’s global expansion efforts, especially in Asia where stars like Ohtani, Yoshinobu Yamamoto and Roki Sasaki draw international attention.
Are Superteams Good for Baseball?
Some say super teams like the Dodgers bring more attention and value to the league. TV ratings for the 2024 World Series were up 67% from 2023 and set a record in Japan.
“Ultimately it’s best for the league if big market teams do well,” Carter said. “But MLB has to find a balance between super teams dominating and other teams having a chance to win.”
California Politicians Weigh In
The controversy goes beyond baseball fans. In March 2024, California State Senator Josh Becker introduced a bill to cap deferred compensation for athletes. His bill specifically called out Ohtani’s contract, saying he could save over $90 million in taxes if he retires outside of California.“He’s dodging taxes like a curveball,” Becker said. “Everyone else has to play by the rules.”
The bill passed the state Senate but was pulled from the Assembly. Becker will try again next year.
Malia Cohen, California’s state controller, said the rich should pay their fair share. “More tax revenue would help all Californians.”
Dodgers’ Strategy Criticism
“Buy Now, Pay Later”: Accused of Exploiting the System
The Dodgers’ extensive use of deferrals has drawn ire from fans and analysts. Critics say they’re avoiding the competitive balance tax and creating an uneven playing field. Social media sleuths called them out on Twitter, comparing the Dodgers to services like Klarna and saying they’re making MLB a “buy now, pay later” league.
“This is bad for the competitiveness of baseball,” said N. Jeremi Duru, a law professor and director of American University’s Sport & Society Initiative. “There’s a lot of concern that this approach eliminates parity in the sport.”
Even with deferrals, the Dodgers will still pay a league-high $142 million in luxury taxes in 2025, so they’re willing to spend. But small market teams can’t compete, so what’s wrong with MLB’s revenue sharing?
The Bigger Picture: Is the MLB Financial Model Sustainable?
Revenue Disparities in MLB
MLB teams rely on regional sports networks (RSN) for revenue, but many RSNs are in financial trouble. The Dodgers have one of the most stable RSN deals in the league—a 25-year, $7–8 billion contract signed in 2013.
This stability allows them to invest in current and future talent. They’re also leading the charge in MLB’s global expansion efforts, especially in Asia where stars like Ohtani, Yoshinobu Yamamoto and Roki Sasaki draw international attention.
Are Superteams Good for Baseball?
Some say super teams like the Dodgers bring more attention and value to the league. TV ratings for the 2024 World Series were up 67% from 2023 and set a record in Japan.
“Ultimately it’s best for the league if big market teams do well,” Carter said. “But MLB has to find a balance between super teams dominating and other teams having a chance to win.”
California Politicians Weigh In
The controversy goes beyond baseball fans. In March 2024, California State Senator Josh Becker introduced a bill to cap deferred compensation for athletes. His bill specifically called out Ohtani’s contract, saying he could save over $90 million in taxes if he retires outside of California.“He’s dodging taxes like a curveball,” Becker said. “Everyone else has to play by the rules.”
The bill passed the state Senate but was pulled from the Assembly. Becker will try again next year.
Malia Cohen, California’s state controller, said the rich should pay their fair share. “More tax revenue would help all Californians.”