Like Lloyd Christmas and Harry Dunne on a shopping spree, the Los Angeles Dodgers are racking up quite a few IOUs.
According to the Associated Press, the team has accumulated over $1 billion in deferred payments to seven players between the years of 2028-46 after the contracts this offseason to Blake Snell (five years, $182 million, with $66 million in deferred money through July 1, 2046) and Tommy Edman (five years, $74 million, with $25 million in deferred money through July 1, 2044).
Unlike the Dumb and Dumber pair, however, the Dodgers are conducting savvy business with their newfound practice of pushing the bill into the future.
The team’s deferrals—most famously the $680 million owed to superstar Shohei Ohtani between 2034-43 as part of the 10-year, $700 million contract he signed last winter—have allowed the Dodgers to circumvent the luxury tax, saving them significant money in the short term.
That’s the big chunk, but Mookie Betts’ 12-year, $365 million contract includes $115 million in deferrals between 2033-44; Freddie Freeman’s six-year, $162 million includes $57 million deferred money between 2028-40; Will Smith’s 10-year, $140 million deal has $50 million in deferred money to be paid out between 2034-43; and Teoscar Hernández’s one-year, $23.5 million from this past season had $8.5 million in deferred money to be paid out between 2030-39.
In the short term, the practice has allowed the Dodgers to build out an absolutely star-studded roster, one that won the World Series in 2024 and will be among the favorites for years to come.
Players also benefit on a number of fronts, including avoiding higher California taxes on their earnings if they move out of the state during the years the deferred payments are being paid out.
The downside for the Dodgers, of course, is that the bill will eventually come due, and it will be a doozy. But the current savings can be invested elsewhere, and by the time it’s time to pay up, the Dodgers could be well-prepared to make those payments while still fielding a competitive team, especially as revenues and the luxury tax threshold rise in future years.
It’s a loophole, no doubt, and one that many smaller-market franchises won’t exercise because they simply can’t afford that level of future payroll obligations. It’s also a loophole that potentially will be closed when the next collective bargaining agreement is negotiated.
“An Ohtani contract, for example—[averaging out to] $70 million for 10 years—that $70 million should count against the luxury tax, not the present-day value,” The Athletic’s Ken Rosenthal opined during the latest Foul Territory podcast (9:18 mark). “That would prevent the Dodgers from playing games with this. It’s not that they’re doing anything illegal. It’s perfectly legal. But it would prevent them from skirting the luxury tax calculation in that fashion.”
It may also face challenges from lawmakers, namely those in California, who have already decried the practice.
It should be noted, however, that deferred payments are nothing new. Anybody who has ever celebrated Bobby Bonilla Day is well aware of that fact. But the Dodgers have taken it to a brand new level, and it seems likely that loophole will eventually be closed on them.
