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Great Moments in Tax Avoidance

Great Moments in Tax Avoidance

Posted on December 24, 2023 by Dan Mitchell

Since governments have a terrible tendency to waste money, I’m a big fan of tax avoidance.

For instance, even though I don’t like itemized deductions for things like charitable contributions and home mortgage interest, I am glad when taxpayers are able to use those tax preferences to reduce the amount of money going to the “wretched” people in Washington.

And I also applaud clever and unusual ways of reducing tax liabilities, both in America and around the world.

  • Trump and Biden dodging taxes.
  • American companies redomiciling.
  • American investors redomiciling.
  • Crossing the English Channel for lower taxes.
  • Tax-free prostitutes in Austria.
  • Scandinavian butter smuggling.
  • Straight men will marry each other.
  • Gay men will adopt their lovers.
  • Pretending you are your mother.

Now I have a new example to applaud.

As reported by The Athletic, Shohei Ohtani has figured out how to keep nearly $100 million out of the clutches of despicable California politicians

…the unique structure of Ohtani’s heavily deferred $700 million contract with the Los Angeles Dodgers has opened the eyes of other high earners. …Ohtani this month agreed to play for the Dodgers for a decade at $70 million per season, but from 2024-33, he’ll draw just $2 million per season. Ohtani is deferring $680 million — more than 97 percent of his earnings — until after his 10-year deal with the Dodgers expires, when that money comes back to him in equal annual payments from 2034-43. …the structure of the contract appears likely to save Ohtani between $90 and $100 million in state taxes, so long as he lives outside of California when the deferred money is paid out. …A 1996 federal law forbids states from taxing retirement income on out-of-state residents when payments are made in “substantially equal periodic” amounts over at least 10 years.

I’m a Yankees fan, but I’ll also be cheering for Ohtani. Especially between 2034 and 2043 when he’ll be getting $680 million and living in a state with no income tax.

And I’ll cheer even more boisterously if other successful Californians figure out ways to mimic his successful strategy.

P.S. I’m guessing Dwight Howard and Phil Mickelson are upset their tax advisors didn’t think of this strategy.

———
Image credit: Mogami Kariya | CC BY-SA 2.0 DEED.


tax avoidance tax compliance Taxation
December 24, 2023
Dan Mitchell

Dan Mitchell

Dan Mitchell is co-founder of the Center for Freedom and Prosperity and Chairman of the Board. He is an expert in international tax competition and supply-side tax policy.

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