This considerable improvement in Americans’ well-being is more striking than the share of income accruing to the country’s highest earners. Compare a median-income household to one in the top 1%. Each has access to high-quality medical care and pharmaceuticals, each can take nice vacations, each can eat in the same restaurants, read the same books, and watch the same television shows, and each has warm clothes and a comfortable home.
To be sure, there are disparities—the wealthier family has better health care, flies first class to the Caribbean on holiday, occasionally eats at Michelin-starred restaurants, and has a bigger house. But this does not negate that inequality in quality of life has shrunk dramatically in recent decades. The quality-of-life gap between a median-income household and one in the top 1% a century ago, and even a century before that, was much larger.
Baseball superstar Shohei Ohtani signed a new 10-year contract this week with the Los Angeles Dodgers, who have promised to pay an eye-popping $700 million.
But unlike most sports contracts, that $700 million won’t be doled out over the 10-year term of the deal—and, as a result, both Ohtani and the Dodgers are poised to dodge (sorry) some of the taxes they might be otherwise obligated to pay on the record-breaking deal.
The 29-year-old Ohtani will collect $2 million in each of the next 10 years. The rest of Ohtani’s $68 million salary will be deferred for a decade, and the Dodgers will owe it to him in annual installments starting in 2034. By the time Ohtani collects the last of those payments in 2043, he’ll be 49 years old (and almost certainly well into retirement).
Because he’ll be playing most of his games in high-tax California, taking most of his pay via what’s effectively a fixed annuity gives Ohtani the possibility of avoiding some massive tax payments. “By the time he starts receiving the $68 million payments, he may be able to avoid state income taxes by living someplace like Florida without an income tax, or by moving back to Japan,” The Wall Street Journal reported this week.
By taking most of his pay in what’s effectively a fixed annuity rather than getting it all in his paycheck, Ohtani could save as much as $98 million in state taxes if he relocates out of California by 2034, according to an analysis by the California Center for Jobs & the Economy.
That report also highlights how dependent California is on high-earning individuals—you know, the same people the state seems determined to keep driving away by hiking taxes. According to the analysis, “the amount of income tax Ohtani could save annually by changing his residence in 2033 is equivalent to the total tax liability of the bottom 1.78 million tax filers in 2021.”