The record contract between Shohei Ohtani and the Los Angeles Dodgers — reportedly 10 years, $700 million — has been widely reported to have extensive and unprecedented deferrals. This is due to the Competitive Balance Tax in the current Collective Bargaining Agreement — also referred to as the luxury tax — and the reported desire of Ohtani (and, of course, the team) to lessen the impact of the deal as it relates to the Dodgers’ potential CBT obligations.
This has led to some questions and discussions about how all of this works, and why a team would seemingly be able to get around the CBT by deferring money.