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Tuesday, October 01, 2019

Report: Anthony Rendon expected to turn down contract worth over $210 million

According to a report from the Washington Post’s Barry Svrluga, the Washington Nationals offered Rendon a seven-year contract in September worth between $210 and $215 million. However, he’s still expected to head into free agency, where that number could head even higher.

Rendon may not be a household name, only making his first All-Star Game this summer, but he’s established himself as one of the game’s best all-around third basemen. The Nationals are known to spend big, especially on Scott Boras clients, and Rendon will be a key name to watch this winter.

RoyalsRetro (AG#1F) Posted: October 01, 2019 at 10:03 AM | 60 comment(s) Login to Bookmark
  Tags: anthony rendon

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   1. Adam Starblind Posted: October 01, 2019 at 10:18 AM (#5884888)
I assume the offer provides for payments beginning only after his eventual death.
   2. Davo Posted: October 01, 2019 at 10:26 AM (#5884890)
Risky move, considering the rampant and unchecked collusion by MLB owners.
   3. JJ1986 Posted: October 01, 2019 at 10:27 AM (#5884891)
Writers need to be better about the deferred money. This is just repeating the Nats untrue number.
   4. snapper (history's 42nd greatest monster) Posted: October 01, 2019 at 10:34 AM (#5884894)
Writers need to be better about the deferred money.

True, but players should be all about deferred money, as long as it is done at a reasonable interest rate.

A structure where you take $30M p.a. for 7 years, and turn it into $15M p.a. for 7 years, and the rest deferred from age 40-65, say at 6%, is good financial planning.
   5. PreservedFish Posted: October 01, 2019 at 10:45 AM (#5884899)
Good financial planning is not going to get me the superyacht I deserve.
   6. Jeff Francoeur's OPS Posted: October 01, 2019 at 12:55 PM (#5884971)
Risky move, considering the rampant and unchecked collusion by MLB owners.

I hear Mueller has a lot of free time these days.
   7. Infinite Yost (Voxter) Posted: October 01, 2019 at 12:57 PM (#5884972)
I guess one of the things about being a big-time professional athlete is that it selects for supreme self-confidence. But damn if I wouldn't have a hard time turning down that much money, especially from a team that consistently wins 90+ games the way the Nats seem to.
   8. Swoboda is freedom Posted: October 01, 2019 at 01:58 PM (#5884997)
A structure where you take $30M p.a. for 7 years, and turn it into $15M p.a. for 7 years, and the rest deferred from age 40-65, say at 6%, is good financial planning.


But you are taking on the credit risk of the team. Not that I think it is a bad risk.
   9. Rough Carrigan Posted: October 01, 2019 at 02:01 PM (#5885000)
And what if inflation comes back and you have 15% inflation like the late 70's? Then deferring it and getting 6% wouldn't be good.
   10. snapper (history's 42nd greatest monster) Posted: October 01, 2019 at 02:07 PM (#5885006)
But you are taking on the credit risk of the team. Not that I think it is a bad risk.

MLB guarantees all payroll obligations.

And what if inflation comes back and you have 15% inflation like the late 70's? Then deferring it and getting 6% wouldn't be good.

Buy stocks and real estate with the rest of your money. BTW inflation never got above 10% for any sustained period (maybe a quarter or two) and fell rapidly after the 10% peak.
   11. Tin Angel Posted: October 01, 2019 at 02:17 PM (#5885009)
On his podcast today Buster Olney said he has heard Rendon wants a shorter contract worth more (like the type Harper turned down from the Dodgers last winter). He has "other interests" outside of baseball, said he never watches it if he isn't playing, and doesn't want to play into his late 30's.
   12. Never Give an Inge (Dave) Posted: October 01, 2019 at 02:22 PM (#5885011)

True, but players should be all about deferred money, as long as it is done at a reasonable interest rate.

A structure where you take $30M p.a. for 7 years, and turn it into $15M p.a. for 7 years, and the rest deferred from age 40-65, say at 6%, is good financial planning.


But the way contracts are typically reported is at a 0% interest rate. $30 per year for 7 years is reported the same way as $15 per year for 7 years with the remaining $105 deferred with no interest until after he retires.
   13. calming him down with his 57i66135 Posted: October 01, 2019 at 02:25 PM (#5885012)
Risky move, considering the rampant and unchecked collusion by MLB owners.

right. it seems like a lot of the "big" teams aren't going to spend big money this winter.

the yankees have to take care of their own, first.
the red sox are already leaking about cutting payroll.
the nationals have been pinching pennies for years.
the cubs might have room to do some things, but they're also paying lester, haywayrd and darvish 60+MM to be not particularly good.
maybe the dodgers will do some things, but they also have to deal with their young players coming into big contracts.

then you get into teams like LAA, CWS, PHI, SFG, but those teams aren't getting into bidding wars; they'll walk away if the price gets too high, and just wait until next year.


if i was a good-ish player, who's over 30 years old, who is relatively happy about where i'm playing, i would think very hard about signing a qualifying offer this year.


and if i didn't take the qualifying offer, i would not let my agent drag out negotiations waiting for some nebulous mystery team. this is going to be a dry winter and players should look to sign as early as possible.
   14. Nasty Nate Posted: October 01, 2019 at 02:31 PM (#5885015)
if i was a good-ish player, who's over 30 years old, who is relatively happy about where i'm playing, i would think very hard about signing a qualifying offer this year.
OK, but at most only one of those things applies to Rendon.
   15. Fancy Crazy Town Banana Pants Handle Posted: October 01, 2019 at 02:33 PM (#5885016)
True, but players should be all about deferred money, as long as it is done at a reasonable interest rate.

A structure where you take $30M p.a. for 7 years, and turn it into $15M p.a. for 7 years, and the rest deferred from age 40-65, say at 6%, is good financial planning.

Maybe. Though I would probably be inclined to take the money and try and invest and beat 6% myself.

But that isn't really the point. It isn't about what players should prefer, but on how the dollar value of contracts is reported. You can have contracts offers with wildly different NPVs reported at the same bottom line number. Which is clearly misleading towards readers. A seven year contract that pays 30m PA over the seven years, and a seven year contract that pays 10m PA over 21 years, should not be reported as being the same.
   16. snapper (history's 42nd greatest monster) Posted: October 01, 2019 at 03:02 PM (#5885032)
Maybe. Though I would probably be inclined to take the money and try and invest and beat 6% myself.

Given the history of athletes and their money, I'd say that 98% of them should invest ultra-safe. They should also tie it up long term so they're not tempted by friends and associates with "can't miss" business opportunities.

Once you have $100M, not losing it is way more important than whether you earn 3% or 6% or 10%.
   17. Traderdave Posted: October 01, 2019 at 03:03 PM (#5885033)
MLB guarantees all payroll obligations.


Interesting. I never knew that, which is surprising considering how much time I waste here.

Buy stocks and real estate with the rest of your money. BTW inflation never got above 10% for any sustained period (maybe a quarter or two) and fell rapidly after the 10% peak.


The CPI Y-O-Y was above 10% for about three years in the 70's and early 80's, in two bursts, one in '74-75 and another '79-81. Your point is basically solid, though. It's been sub 5% in approximately 40 of the last 50 years, and well below that for the last decade.

He has "other interests" outside of baseball, said he never watches it if he isn't playing, and doesn't want to play into his late 30's.


Being an elite athlete takes *DRIVE* -- obsessive drive. A guy who expresses that relative complacency is not one I'd offer a long term deal to. (Note: relative complacence, vs other players)

   18. Traderdave Posted: October 01, 2019 at 03:04 PM (#5885035)
Once you have $100M, not losing it is way more important than whether you earn 3% or 6% or 10%.


They should stick to munis, blue chips and real estate. Once you're rich, the secret is to STAY rich.
   19. snapper (history's 42nd greatest monster) Posted: October 01, 2019 at 03:09 PM (#5885037)
They should stick to munis, blue chips and real estate. Once you're rich, the secret is to STAY rich.

Yes. It's a lot easier to turn $100M into $5M than to turn $100M into $500M.
   20. Never Give an Inge (Dave) Posted: October 01, 2019 at 03:28 PM (#5885042)
Given the history of athletes and their money, I'd say that 98% of them should invest ultra-safe. They should also tie it up long term so they're not tempted by friends and associates with "can't miss" business opportunities.

Yes, I've often said the best thing about Bobby Bonilla's deal wasn't the 8% implied interest rate, but rather that it prevented him from spending the money too early. (This is based on general behavior of celebrities/athletes, not on anything I know about Bobby Bo in particular.)
   21. Never Give an Inge (Dave) Posted: October 01, 2019 at 03:31 PM (#5885043)

He has "other interests" outside of baseball, said he never watches it if he isn't playing, and doesn't want to play into his late 30's.

Being an elite athlete takes *DRIVE* -- obsessive drive. A guy who expresses that relative complacency is not one I'd offer a long term deal to. (Note: relative complacence, vs other players)

Wasn't Jeff Kent similar? He remained very productive through age 39.
   22. caspian88 Posted: October 01, 2019 at 03:52 PM (#5885050)
He has "other interests" outside of baseball, said he never watches it if he isn't playing, and doesn't want to play into his late 30's.

What day does Rendon hit 10 years of service time (he was at 5.130 in January)? Last day of the season four years from now?
   23. Misirlou gave her his Vincent to ride Posted: October 01, 2019 at 03:59 PM (#5885052)
Maybe. Though I would probably be inclined to take the money and try and invest and beat 6% myself.


It would be tough to do, after taxes take about 40% of it right off the bat.
   24. Bote Man Posted: October 01, 2019 at 04:04 PM (#5885053)
Being an elite athlete takes *DRIVE* -- obsessive drive. A guy who expresses that relative complacency is not one I'd offer a long term deal to.

That suits Tony just fine. He is the diametric opposite to a guy like Javy Baez: he eschews giving interviews, typically cutting short post-game interviews on the field after only 2 questions; he's been known to yawn at the plate; he has stated numerous times that baseball is just his job.

He has also uttered the obvious to get it out there that Boras works for him, not the reverse, so he could order Boras to complete the deal with the Nats. That would happen quietly, I'm sure.
   25. snapper (history's 42nd greatest monster) Posted: October 01, 2019 at 04:34 PM (#5885063)
That suits Tony just fine. He is the diametric opposite to a guy like Javy Baez: he eschews giving interviews, typically cutting short post-game interviews on the field after only 2 questions; he's been known to yawn at the plate; he has stated numerous times that baseball is just his job.

If a guy views baseball as just a job, wouldn't that make him more likely to want to squeeze every penny out of his next contract?
   26. bunyon Posted: October 01, 2019 at 04:40 PM (#5885069)
If a guy views baseball as just a job, wouldn't that make him more likely to want to squeeze every penny out of his next contract?

The worry is when will he decide he's signed his last contract? Let's say you sign him 4/150 (or something crazy like that). If after next season, he realizes he doesn't want to play after the contract is over (and he wouldn't need to, financially), then he might just let himself go. With a guaranteed contract, the only financial incentive is the next contract.

Now, I don't know the guy. Baseball is, actually, his job, so it may well be that he takes his work seriously and will keep working hard. Plenty of people who aren't "passionate" about their work do work hard. It's just a worry and there is no way to guarantee any player keeps working hard in what seems to be their last contract. At least a short one is over quick.
   27. snapper (history's 42nd greatest monster) Posted: October 01, 2019 at 04:58 PM (#5885080)

Now, I don't know the guy. Baseball is, actually, his job, so it may well be that he takes his work seriously and will keep working hard. Plenty of people who aren't "passionate" about their work do work hard. It's just a worry and there is no way to guarantee any player keeps working hard in what seems to be their last contract. At least a short one is over quick.


I would think pride and professionalism would make him try. He's got to play to get paid. Would anyone really rather be a bad player rather than a good one if it only required a few extra hours of work a day to be good?
   28. Adam Starblind Posted: October 01, 2019 at 05:00 PM (#5885084)


It would be tough to do, after taxes take about 40% of it right off the bat.


But then you have to take down the 6% too. Either way the earnings are taxed.
   29. Commissioner Bud Black Beltre Hillman Fred Posted: October 01, 2019 at 05:12 PM (#5885092)
If a guy views baseball as just a job, wouldn't that make him more likely to want to squeeze every penny out of his next contract?
Nobody has argued otherwise. The tangent started in post 11, which noted reports that Rendon "wants a shorter contract worth more" because he isn't interested in playing into his late 30s.
   30. snapper (history's 42nd greatest monster) Posted: October 01, 2019 at 05:18 PM (#5885097)
But then you have to take down the 6% too. Either way the earnings are taxed.

But you're effectively investing the income with interest, like a 401(k). You won't pay the taxes until you get the income, and the retired player will face a lower tax rate, and probably be living in a state with no income tax.
   31. Walt Davis Posted: October 01, 2019 at 05:44 PM (#5885110)
#4 ... but that's not how any of these contracts are structured. In every current contract with substantial deferment that I'm aware of, the payments start immediately after the contract ends (including immediately after an opt-out in contracts that have those). In the earlier story on the Rendon offer, they suggested it was structured like Scherzer's which, in payment terms, is 14 years at $15 M each with no interest on the nominal 7/$210.

MLB and MLBPA seem to assume somewhere around a 4% return for lux tax purposes such that the 14/$210 becomes a NPV around $190 which is not really so radically different.

doesn't want to play into his late 30's

Unless we are now defining 36 as "late 30s", I don't think Rendon has a lot to worry about regarding this contract -- I'll be surprised if he gets offered more than 7 years unless it's just a "hidden" deferment.

But if Olney is right, it's an interesting question what a short-term contract would look like. It would almost certainly have a deferred payment structure. It's got lux tax threshold implications of course -- but I suppose any big market team can probably find a way to make 4/$140-150 work.

Without re-doeing the work I did in the other thread, I'll guesstimate that (based on the more optimistic set of comps) that you could probably expect about 18 WAR over 4 years. So $140-150 sounds about right. (On the more pessimistic set of comps, it's proabably closer to 12-15 WAR which is probably not the set of comps Boras has in mind :-).

   32. Misirlou gave her his Vincent to ride Posted: October 01, 2019 at 06:18 PM (#5885116)
You won't pay the taxes until you get the income, and the retired player will face a lower tax rate, and probably be living in a state with no income tax.


I agree with the first and 3rd parts, but I doubt the second is true. The highest bracket starts at $600,000 for married filing jointly. If he's not getting more than that in retirement, he signed a bad contract.
   33. Misirlou gave her his Vincent to ride Posted: October 01, 2019 at 06:24 PM (#5885119)
But then you have to take down the 6% too. Either way the earnings are taxed.


I'm not a tax attorney, but I don't see why. For a contract that says "We will pay you X now, and Y in 10 years, where Y is the amount of principle deferred, plus interest compounded at 6% for 10 years", why would that interest be taxed every year? It's a paper gain that isn't realized for 10 years.
   34. snapper (history's 42nd greatest monster) Posted: October 01, 2019 at 07:30 PM (#5885130)
I agree with the first and 3rd parts, but I doubt the second is true. The highest bracket starts at $600,000 for married filing jointly. If he's not getting more than that in retirement, he signed a bad contract.

He could be getting way more than that in cash flow, and have very little taxable income. Munis, equities, real estate, and life insurance can all be used to structure a portfolio that generates minimal taxable income.
   35. Tin Angel Posted: October 01, 2019 at 07:51 PM (#5885134)
Eh, if I was a wealthy athlete I wouldn’t invest in any of that stuff. After I retired I’d buy a couple of strip clubs and then just gamble a ton and not report any of the earnings.
   36. . Posted: October 01, 2019 at 08:03 PM (#5885136)
Being an elite athlete takes *DRIVE* -- obsessive drive.


Nah -- tons of elite athletes don't have much drive at all, much less "obsessive drive."(*) It's far more dependent on having elite talent.

(*) These kind of fanboyish sentiments always completely puzzle me. Why do people have such a psychic need for these kind of things to be true and to say them out loud so often? Complete mystery.
   37. Sunday silence Posted: October 01, 2019 at 08:19 PM (#5885148)
the same reason you have need to make incredibly overgeneralized/simplistic statements without any evidence whatsoever.
   38. Traderdave Posted: October 01, 2019 at 08:28 PM (#5885153)
Reaching the pinnacle of any field takes drive. Reaching the pinnacle of an intensely competitive field like, say, pro sports, takes a lot more. Ask any big leaguer what got them through the minors and they'll tell you it was grit. Having done business with a few of them, I have heard that answer more than once.
   39. . Posted: October 01, 2019 at 08:34 PM (#5885159)
Ask any big leaguer what got them through the minors and they'll tell you it was grit. Having done business with a few of them, I have heard that answer more than once.


Of course they say that. If it's hard work, that shows character. If it's talent, that shows luck. Of course they're going to say it's hard work. Practically every well-off person in the US in any field attributes their success to hard work.
   40. bfan Posted: October 01, 2019 at 08:43 PM (#5885166)
2 things:

I think deferring earnings might have been a decent strategy when you could move your money over time to hit some lower tax brackets at the later years. Salaries are so high now that even, for example, Bobby Bonilla, taking it over 40 years (?) is getting $1,000,000.00 a year which puts him in that wonderful 37.5% federal tax bracket.

Second, Washington has been pinching pennies for years? I have them 7th in the mlb at just over $162 million. They have signed high interest FA's Schertzer and Corbin in the last 5 years, and retained Strasberg. I am not sure that is a penny-pinching franchise.
   41. Walt Davis Posted: October 01, 2019 at 10:06 PM (#5885229)
Second, Washington has been pinching pennies for years? I have them 7th in the mlb at just over $162 million. They have signed high interest FA's Schertzer and Corbin in the last 5 years, and retained Strasberg. I am not sure that is a penny-pinching franchise.

I think it is a reference to their habit of handing out highly deferred contracts. Which, no, isn't "penny pinching", it's PR in that 7/$210 looks flashier than it really is.

Just from Scherzer's contract:

$50 M signing bonus with $5 M paid in year 1 and 3/$45 paid out in years 5-7
$10 M salary year 1
$15 M salary years 2-4
$35 M salary years 5-7, deferred without interest in its entirety

The $105 M in deferred salary paid out at $15 M per for years 8-14.

Could you possibly come up with a stranger way to structure a contract?

Yes, let me present Stephen Strasburg (covering 7 years of play)

$10 M signing bonus paid in year 3
$15 M in year 1-2
$35 M in year 3, $30 M deferred without interest
$25 M in year 4, $10 M deferred without interest
$15 M in year 5-6
$45 M in year 7, $30 M deferred without interest

opt-out after year 3
opt-out after year 4

If no opt-out then $70 M deferred is paid out at $10 for years 8-14
If opt-out after 3, $30 M deferred paid out at $10 for years 4-6
If opt-out after 4, $40 M deferred paid out at $10 for years 5-8

If he stays for it all, that's $15 M per year for 7 years then $10 M per year for 7 years. I assume there's some weird reason why it wasn't just structured as $25 per year with $10 per year deferred (similar to Scherzer's) but have no idea what it is. He also gets an extra $1 M in any season he hits 180 IP.

Corbin's contract only has $10 M deferred but has some unusual annual salaries but that's reasonably common and presumably about reducing actual total team payroll paid out in the early years. Zimmerman's contract is also fairly standard in structure.
   42. base ball chick Posted: October 01, 2019 at 11:17 PM (#5885312)
if i was gonna be getting serious $$$ like that i would do something like the bonilla deal. it's good to know that you are getting $$$ coming in for years and years, no matter what, and i sure as heck wouldn't defer no interest

then again, i'm not the sort who thinks that the world thinks i have a larger dingdong if i have a higher yearly salary
   43. Dr. Vaux Posted: October 01, 2019 at 11:22 PM (#5885317)
Practically every well-off person in the US in any field attributes their success to hard work.


Practically every person in the U.S. has worked hard--both those who have gotten somewhere and those who haven't. Who says "well, I haven't got anything, but then again, I've spent my life sitting on my ass, so screw me"?
   44. Brian C Posted: October 01, 2019 at 11:31 PM (#5885322)
then again, i'm not the sort who thinks that the world thinks i have a larger dingdong if i have a higher yearly salary

I remember the old story of Andre Dawson going to the Cubs when he was a free agent, and basically saying, "I'm signing with you, just fill in a salary." It's just where he wanted to play and that was that.

While that's an extreme case, I'm always surprised that there aren't more prominent free agents that just sign where they want to play. I understand that guys don't want to leave huge amounts of money on the table, but since financial security isn't a concern for top guys, I'd expect that the bidding-war situations would be the exception instead of the rule. But that doesn't really seem to be the case.

Or, maybe it is and my perception is just skewed.
   45. PreservedFish Posted: October 01, 2019 at 11:34 PM (#5885325)
Brian, I don't even know what the main motivating factor would be. Teammates and managers are transient. Team fortunes are unpredictable. They can spend less than 90 days in their "home" city per year. How does someone decide where he wants to play?
   46. Spahn Insane Posted: October 01, 2019 at 11:37 PM (#5885328)
Of course, Dawson's contract was in the context of owner collusion.
   47. Brian C Posted: October 01, 2019 at 11:39 PM (#5885329)
Practically every person in the U.S. has worked hard--both those who have gotten somewhere and those who haven't.

I think there's a large segment of the US population for whom the hardest work they've ever done was voluntarily at the gym.
   48. Barry`s_Lazy_Boy Posted: October 01, 2019 at 11:40 PM (#5885330)
Tax mgmt will have a larger impact on Rendon than investment returns.
   49. Brian C Posted: October 01, 2019 at 11:48 PM (#5885332)
Of course, Dawson's contract was in the context of owner collusion.

True, and I believe his actual salary was comically low as a result, but I'm not sure that changes the point of the story.
Brian, I don't even know what the main motivating factor would be. Teammates and managers are transient. Team fortunes are unpredictable. They can spend less than 90 days in their "home" city per year. How does someone decide where he wants to play?

Good points, although in a lot of cases the "home" city may well be somewhere they'd want to/already live in the offseason, too. Or maybe they like the ballpark, or are impressed by the fan support, or even if it's just 90 days that's still way more time than you spend anywhere else during the season so you make the best of it.

To a big extent, people face these kinds of choices in the real world, too, so it's not much difference. If I get an offer for a new job, I might really like my potential new boss, and the commute may be a lot better, and the work seems more interesting ... but circumstances can quickly change everywhere. My new boss might not be there in a year and be replaced by a jerk, the company might close the local office and want me to transfer (if I'm lucky), I might get new assignments that aren't so interesting. You just evaluate your options and make the best choice you can.

My point is just that for an elite MLB free agent, money isn't really that much of a consideration, except (as base ball chick alludes to) basically as a status symbol. Your financial security is assured no matter what.
   50. Howie Menckel Posted: October 02, 2019 at 12:37 AM (#5885343)
I'm always surprised that there aren't more prominent free agents that just sign where they want to play.

I have seen this up close and personal.

$100M+ stud athletes got there by being hyper-competitive beyond belief.

I vaguely remember a SI survey in the 1980s Olympic athletes, and the question was something like would you give up 10 years of your life for a medal. the collective response was terrifying.

These guys would benefit from having a KILL switch on salary competitions vs their peers, once the numbers hit a certain stratosphere - but they rarely do.

they just can't turn the damn switch off. that's why you get those "gotta be able to feed my family" gripes from someone with $50M or more in earnings.

of course it's absurd (well, for the few who have saved any of that money) - but it's better than admitting that you are addicted to all competition to such a great extent that you are willing to leave a city that you love, and take your family with you, just to grab a few extra meaningless dollars so you attain a tiny gain in salary status.

(in my December post, I will explain the truth about Santa Claus.)
   51. Walt Davis Posted: October 02, 2019 at 04:38 PM (#5885574)
I'm not sure that changes the point of the story.

(Re: Dawson) Given collusion, the only choice he was being given was to return to Montreal (a month into the season for essentially whatever they would offer). So, really wanting to get off turf and probably for other reasons, he decided to create his own choice. Given a "choice" between a rock and 25 hard places, and really really not wanting to go back to the rock, you might as well make your stand in whichever of those 25 hard places you think would be best. But we'll never know what would have happened if, say, San Diego had rocked up with a 2/$2M offer in mid-Feb.

So while it is clear that Hawk had priorities other than straight money/years, I don't think we can really conclude it was Cubs or bust because he really had no choice to make.

I reviewed some of the old articles and flashbacks. It seems he was the 2nd-lowest paid among Cub vet "regulars." It also turned out I mis-remembered the next offseason. I thought the Cubs had rocked up with a big money/years contract but my memory is about as far off as can be. He was actually taken to arb WHERE HE LOST and was awarded $1.85 (I think he asked for $200-300,000 more), settling that into a 2/$3.95 contract. According to b-r, that was still top 10 at the time but I thought they'd made him the highest-paid player at the time of signing.
   52. What did Billy Ripken have against ElRoy Face? Posted: October 02, 2019 at 04:44 PM (#5885578)
How does someone decide where he wants to play?
School quality, duh.
   53. Never Give an Inge (Dave) Posted: October 02, 2019 at 04:55 PM (#5885588)

I'm not a tax attorney, but I don't see why. For a contract that says "We will pay you X now, and Y in 10 years, where Y is the amount of principle deferred, plus interest compounded at 6% for 10 years", why would that interest be taxed every year? It's a paper gain that isn't realized for 10 years.

I'm not a tax attorney either but I suspect if too many players did this you would find tax laws being rewritten and taxing authorities coming after them. (A number of states already have tax rules specifically written for athletes and entertainers.)
   54. Traderdave Posted: October 02, 2019 at 05:10 PM (#5885596)
It's a paper gain that isn't realized for 10 years.


Also not a tax attorney but in the case of zero coupon bonds, there are paper gains that are taxed each year even though no cash interest is actually paid out until maturity. I doubt that applies to a deferred contract, but it certainly isn't impossible.
   55. bookbook Posted: October 02, 2019 at 05:38 PM (#5885606)
They should stick to munis, blue chips and real estate. Once you're rich, the secret is to STAY rich.

Nah. You actually reduce your overall risk by diversifying. Real estate isn’t a great investment, except after an interruption that has artificially deflated prices. Blue chips underperform for long stretches. You want some real assets (commodities, and such) to go with a generous chunk of small-cap, and mezzanine level venture funds (very illiquid, but tend to achieve returns in the high teens on an annualized basis to compensate). 20-30% should be bonds, 30% large cap or so.

The deferred money (with interest) can replace the bonds in your portfolio, I guess, but if it’s more than 30% of the total, it’s not optimal for the player.
   56. Never Give an Inge (Dave) Posted: October 02, 2019 at 06:28 PM (#5885611)

Also not a tax attorney but in the case of zero coupon bonds, there are paper gains that are taxed each year even though no cash interest is actually paid out until maturity. I doubt that applies to a deferred contract, but it certainly isn't impossible.

I don't think deferred comp works that way today (I receive some deferred comp in my job--a lot less than Scherzer and Strasburg--and it gets taxed in the year that I receive it, not the year I earn it.) But if the IRS perceived that everyone was entering into massively deferred contracts to avoid taxes on investment income, they might rewrite the rules.
   57. Walt Davis Posted: October 02, 2019 at 09:24 PM (#5885696)
I'm curious about deferments and these laws about athletes paying tax in the city in which they earned the income (i.e. LA takes a cut of visiting players' salaries). Anybody know if that applies to the full earned income and whether it's collected now or at payment? Collecting it at time of payment would seem to be a substantial hassle for the local tax agency to keep track of.
   58. Never Give an Inge (Dave) Posted: October 02, 2019 at 09:39 PM (#5885715)
Again just speaking from personal experience, when my employer pays me deferred compensation, some of which relates to years I worked in the UK, they pay it in the relevant country and withhold the relevant taxes (a pain in my ass because it means I still have to file income tax returns and maintain a bank account in the UK). Now they are not doing that for multiple states within the US — that is my responsibility to keep track of. But it shouldn’t be that administratively difficult for the teams because they know exactly how many games each player is playing in each jurisdiction.
   59. Bote Man Posted: October 02, 2019 at 11:08 PM (#5885761)
Bryce Harper longs for the 1040-EZ
   60. Greg Pope Posted: October 02, 2019 at 11:41 PM (#5885781)
But it shouldn’t be that administratively difficult for the teams because they know exactly how many games each player is playing in each jurisdiction.

But players don't get paid by the game. And they don't only get paid if they play. I would assume that the local city/state wants to tax 1/162 of the players' salaries for each game that the team plays in the city/state. In other words, it doesn't matter if the Cubs travel to LA but Rizzo sits out a game. In fact, it probably doesn't matter if Lester even pitches during the series or if Baez is on the DL and doesn't even travel with the team.

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