Will Juan Soto top Shohei Ohtani's deal? In the era of deferred money, it might depend on the math
Deciding whether Juan Soto tops Shohei Ohtani for baseball’s largest contract could be in the eye of the beholder because of all the deferred money in Ohtani’s deal
NEW YORK — Deciding whether Juan Soto tops Shohei Ohtani for baseball’s largest contract could be in the eye of the beholder because of all the deferred money in Ohtani's deal.
Ohtani agreed last December to a $700 million, 10-year deal with the Los Angeles Dodgers, easily exceeding the previous high set when Mike Trout and the Los Angeles Angels struck a $426.5 million, 12-year agreement through 2030.
Ohtani’s deal includes $680 million in deferred money payable from 2034-43. There are several interpretations for how to value that deal in current dollars:
1. For baseball's luxury tax, the average annual value is pegged at $46.08 million using a 4.33% discount rate.
2. The players' association uses a 5% rate, which puts the value at $43.75 million per season.
3. For MLB's regular payroll, a 10% rate results in a $28.21 million per year rate.
Soto could get a contract of 10-to-15 years for $600 million or more.
His agent, Scott Boras, is not a big fan of deferred money and thinks teams might not insist on delaying the cash.
“I think it’s much less of an issue than it was before,” Boras said. “Deferral as a mechanism for me, is it: Will it impede my ability to get the greatest asset I can acquire? And the answer to that is I don’t think they’re going to want to do anything that impedes their primary pursuit and goal.”
The interest figure used for discounting to determine luxury tax value is set in the collective bargaining agreement as the federal mid-term rate defined in section 1274(d) of the Internal Revenue Code for the October preceding the initial
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