Markus Andrews

The Bitwise Bitcoin ETF (BITB) has the lowest expense ratio of all the funds poised to launch Thursday, at 0.20%.
Bitwise and other funds have waivers that forego all or part of the fees for a period of time.
Crypto-focused asset managers like Grayscale have the highest fees.

CFOTO | Future Publishing | Getty Images

The bitcoin exchange-traded funds launching Thursday after the SEC’s long-awaited approval come at a wide variety of price points, with signs that a fee war is already underway.
The Bitwise Bitcoin ETF (BITB) has the lowest expense ratio of all the new bitcoin funds, at 0.20%. Several other funds are close behind, including the Ark21Shares Bitcoin ETF (ARKB) at 0.21% and the iShares Bitcoin Trust (IBIT) at 0.25%.

The Bitwise fund also has a temporary waiver that will eliminate the fee entirely for six months on the first $1 billion of assets. Other proposed funds have similar waivers, meaning early adopters of the bitcoin ETFs will have little or zero management cost for a brief time.

Bitcoin ETF fee comparison

Fund
Ticker
Fee

Bitwise Bitcoin ETF
BITB
0.20%*

Ark 21Shares Bitcoin ETF
ARKB
0.21%*

Fidelity Wise Origin Bitcoin Fund
FBTC
0.25%*

iShares Bitcoin Trust
IBIT
0.25%*

VanEck Bitcoin Trust
HODL
0.25%

Franklin Bitcoin ETF
EZBC
0.29%

WisdomTree Bitcoin Fund
BTCW
0.30%*

Invesco Galaxy Bitcoin ETF
BTCO
0.39%*

Valkyrie Bitcoin Fund
BRRR
0.49%*

Hashdex Bitcoin ETF
DEFI
0.94%

Grayscale Bitcoin Trust
GBTC
1.5%

Source: SEC filings; * indicates temporary waiver for part or all of the management fee

The fees for bitcoin funds are higher than many broad stock index funds, with the SPDR S&P 500 ETF Trust (SPY) charging less than 0.10%. But the pricing is in-line with or even below the biggest commodity funds, as SPDR Gold Shares (GLD) and the United States Oil Fund (USO) charge 0.40% and 0.60%, respectively.
Fund managers make money by charging fees on the assets under management. ETF fees have been trending lower over time, and some asset managers have shown a willingness to run a new fund at a loss in order to attract more assets and maximize revenue long-term. The fees are taken out of a fund’s asset pool, and investors are not billed individually.
The low prices before the launch show that the battle to lower fees is already in effect for crypto funds. For example, Ark 21Shares, Valkyrie and Invesco Galaxy and others had shown higher fees initially but lowered them in subsequent filings. Even Bitwise dropped its proposed fee to 0.20% from 0.24%, which was already the lowest of the initial batch.
“I think the level of competition was maybe higher than expected. I think there were a couple of issuers like Ark for example that signaled potentially higher fees, and once the rubber sort of met the road, they all came in pretty low,” said Bryan Armour, director of passive strategies research for North America at Morningstar.

Much cheaper than options before

The fees will be a big change from the other bitcoin fund options already on the market. For example, BITO has an expense ratio of 0.95%, while the previously over-the-counter Grayscale Bitcoin Trust (GBTC) charged 2%.
“I think it’s great for investors, especially in the vein of what’s currently available in the market,” Armour added.
Grayscale is cutting its fee on GBTC as part of the conversion of that product to an ETF, but only to 1.5%. That is the highest of any fund slated to launch by a wide margin.
The fund’s 10-year track record and existing size of about $29 billion could give it an advantage over new entrants. The high fee could also be a bet that current GBTC shareholders are not willing to sell their shares and move to a cheaper fund because that could create a tax bill that could offset the benefits of the lower fees.
“We believe the product’s management fee reflects its value, as investors and the broader capital markets will benefit from GBTC’s large asset base, strong liquidity, and ten-year track record,” Edward McGee, Grayscale CFO, said in a statement.
Other crypto-focused asset managers are also charging a relative premium. The second-highest published fee is from the Hashdex Bitcoin ETF (DEFI), which is a strategy change of an existing bitcoin futures fund, at 0.94%. Valkyrie is charging 0.49% for its fund BRRR, though it is offering a temporary waiver.
Grayscale CEO Michael Sonnenshein said Thursday on CNBC’s “Squawk Box” that his firm’s experience in dealing with crypto helped to justify the higher price point.
“We’re a crypto specialist. We’ve weathered all different types of speed bumps and advancements within the crypto ecosystem. For a lot of these asset managers and issuers, this is the first time they’re going to be dealing with the complexities that go into running these types of products,” Sonnenshein said. More

Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), during an interview in Washington, DC, US, on Thursday, July 27, 2023. 
Andrew Harrer | Bloomberg | Getty Images

Securities and Exchange Commission Chair Gary Gensler’s statement on why the agency has approved the listing and trading of a group of spot bitcoin ETFs indicates that he is still hostile to the cryptocurrency in general.
Gensler was faced with the difficult task of explaining why the SEC has reversed its position on bitcoin ETFs. He said that circumstances “have changed.”

They changed because the SEC lost a key court case last August: The U.S. Court of Appeals for the D.C. Circuit held that the commission failed to adequately explain its reasoning when it turned down Grayscale’s proposed bitcoin ETF.
Gensler was forced to give in, but not on all fronts.
For starters, he is engaged in several ongoing legal battles with the crypto community. In large part, the conflicts are based on his claim that most crypto assets are securities that come under the purview of the SEC. 
In his statement, Gensler gave no indication he was changing his approach on this topic:
“Nor does the approval signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws. As I’ve said in the past, and without prejudging any one crypto asset, the vast majority of crypto assets are investment contracts and thus subject to the federal securities laws.” 

Will bitcoin ETFs make Wall Street — wirehouses and financial advisors — more willing to recommend the cryptocurrency to clients and allow it to trade on their platforms? 
Possibly, but Gensler made it clear that broker-dealers will have to adhere to existing rules: 
“Further, existing rules and standards of conduct will apply to the purchase and sale of the approved [exchange traded products]. This includes, for example, Regulation Best Interest when broker-dealers recommend ETPs to retail investors, as well as a fiduciary duty under the Investment Advisers Act for investment advisers.”
Regulation Best Interest requires broker-dealers to act in the best interest of their retail customers when making investment recommendations. These recommendations must be “suitable” for the client. 
That is a potential investment minefield for investment advisors, and it’s likely to keep many advisors away from recommending bitcoin for some time. 
Finally, Gensler couldn’t help taking a parting shot at bitcoin in general: 
“Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing. While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin.” More

The approval could prove to be a landmark event in the adoption of cryptocurrency by mainstream finance.
The decision will likely lead to the conversion of the Grayscale Bitcoin Trust, which holds about $29 billion of the cryptocurrency, into an ETF.
Traditional asset managers including BlackRock and Fidelity are also poised to launch bitcoin funds.

Chesnot | Getty Images

The U.S. Securities and Exchange Commission on Wednesday approved rule changes to allow the creation of bitcoin exchange-traded funds in the U.S., a long-awaited move that will give regular investors access to the controversial and volatile cryptocurrency.
The decision will likely lead to the conversion of the Grayscale Bitcoin Trust, which holds about $29 billion of the cryptocurrency, into an ETF, as well as the launch of competing funds from mainstream issuers such as BlackRock’s iShares and Fidelity. The first funds are poised to begin trading Thursday.

The approval may prove to be a landmark event in the adoption of cryptocurrency by mainstream finance, as the ETF structure gives institutions and financial advisors a familiar and regulated way to buy exposure to bitcoin.
“We think that the SEC approval, should we and others get it, is a green light for institutions. We’ve been talking to quite a few of them, and they’re much more interested now that the SEC effectively is paving the way,” Ark Invest CEO Cathie Wood said on CNBC’s “Halftime Report” on Monday. Ark Invest has partnered with 21Shares on a proposed bitcoin fund.
The decision comes after an official SEC social media account on Tuesday falsely said that bitcoin ETFs had been approved. The SEC said the account had been compromised.
The regulator has for years opposed a so-called spot bitcoin fund, with several firms filing and then withdrawing applications for ETFs in the past. SEC Chair Gary Gensler has been an outspoken critic of crypto during his tenure.
However, the regulator appeared to change course on the ETF question in 2023, possibly due in part to an August loss to Grayscale in a court decision that criticized the SEC for blocking bitcoin ETFs while allowing funds that track bitcoin futures.

“Importantly, today’s Commission action is cabined to ETPs holding one non-security commodity, bitcoin. It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities. Nor does the approval signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws,” Gensler said in a statement Wednesday.
Optimism around approval first reemerged this year after asset management giant BlackRock filed an application in June, leading to a flood of applications from its rivals. The partnership of Ark Invest and 21Shares has the longest active filing, and a deadline for the SEC on the fund in January led many industry experts to expect that the first bitcoin ETFs would be approved shortly after the start of 2024.
More than 10 different firms are now in the formal process toward a launch, with the competition to become one of the market leaders expected to include differing expense ratios and a heavy marketing blitz. Several firms have already cut their original proposed fee.
It is not guaranteed that all applications will lead to a fund entering the market. The Cboe website on Wednesday afternoon indicated that several of the bitcoin ETFs would begin trading on its BZX exchange on Thursday.
The anticipation of the ETF also appears to have boosted the price of bitcoin in recent months. Some crypto advocates believe the arrival of bitcoin ETFs will unleash new demand for asset class from types of investors who were previously scared off by concerns about custody and the safety of crypto-specific exchanges.
The approval of the ETFs comes after a year that saw major law enforcement action against crypto firms and industry leaders, including the conviction of FTX founder Sam Bankman-Fried and multiple actions against Binance and its founder Changpeng Zhao.Don’t miss these stories from CNBC PRO: More

Reaching retirement with enough money to live on is a big-ticket goal.
Yet, many people have not consulted with a professional to make sure they’re on track.
For some pre-retirees who are members of Gen X, the oldest of whom turn 59 this year, low retirement savings levels may pose a challenge.

Mihtiander | Getty Images

People age 50 and older are nearing the final stretch when it comes to planning for retirement.
Yet, 62% of those in that age cohort have not consulted a professional to help plan for their golden years, according to a recent survey from AARP.

The top answer for why, with 41%, is they prefer to handle the financial planning themselves or to leave it to their spouse.
That was followed by 35% who said they don’t have much retirement savings and 30% who say they cannot afford a financial professional, the December survey of 1,002 adults found.
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The median age workers 50 and older expect to retire is 67, according to the Transamerica Center for Retirement Studies, while some individuals in that age cohort are already transitioning into retirement.
Transamerica’s research also found retirement often does not happen on time, with 56% of retirees hanging up their hats sooner than planned. Meanwhile, 37% retired when they expected, while 7% retired later.

Many Gen Xers are struggling to save for retirement

For some pre-retirees who are members of Gen X, the oldest of whom turn 59 this year, low retirement savings levels may pose a challenge.
The typical Gen X household has just $40,000 in retirement savings, according to research from the National Institute on Retirement Security.
The bottom half of Gen X earners only have a few thousand dollars saved toward retirement, the research found.

Those who fall in the bottom half typically do not have access to a workplace retirement plan, noted Dan Doonan, executive director at the NIRS. Encouraging financial literacy may help to improve those balances, he said.
“If you have so much savings at retirement, how much income does that produce?” Doonan said. “I think knowledge around that area is probably not very strong.”
For example, based on a 4% withdrawal rule, $100,000 in retirement savings means you would expect about $4,000 in annual income.
“I don’t think it’s widely understood that it’s that low,” Doonan said.

‘Everybody should have a financial plan’

Another obstacle is the way the financial industry is structured, which may lead prospective retirees to be reluctant to pay for advice from their already-low retirement balances, he noted. Meanwhile, financial professionals are typically better rewarded for serving more affluent clients.
However, people who have lower assets or income should not necessarily be discouraged from seeking professional advice.
“Everybody should have a financial plan because it helps you map out the terrain for the rest of your life,” said Daphne Jordan, a certified financial planner and board chair at the National Association of Personal Financial Advisors, or NAPFA.

Some financial planners are compensated based on hourly rates or flat rates, and that information should be readily available on their website, noted Jordan, who is also a senior wealth advisor at Pioneer Wealth Management Group in Austin, Texas.
It is important to check whether a professional has the certified financial planner designation, Jordan said, as they are trained to look at your entire financial picture, including areas such as your cash flow, insurance coverage and Social Security claiming strategy. Advisors who are affiliated with NAPFA operate on a fee-only basis, which means they are not paid via commissions, nor do they sell financial products.
Search tools provided by NAPFA, the CFP Board or the XY Planning Network may help identify potential financial professional matches. Importantly, prospective clients should also cross check the professional’s names with the U.S. Securities and Exchange Commission and FINRA websites to see if they have any complaints against them.
Before selecting one professional, talk to a few prospects to see who you vibe with the most, Jordan advised.
“For the amount that you pay for cable in a year, you can pay a financial planner, a professional certified financial planner, and then you’ll get that peace of mind when it comes to your hard-earned money,” Jordan said.
While certified financial planners are required to put the interests of their clients first, that is not true for all financial professionals. Yet the AARP survey found most individuals — 89% — who either work with a financial professional or plan to expect they will be acting in their best interests.
Whether protections should be expanded is currently being debated in Washington, with a Wednesday Capitol Hill hearing on a proposed fiduciary rule that would increase protections for retirement advice. The SEC already has a best interest rule, while the Department of Labor’s proposal would expand those protections to other areas not regulated by the SEC, particularly with the sale of products.
“It’s basically just saying that look, whether you want to recommend somebody invest in a stock or a bond, or a mutual fund or an insurance product, that’s fine,” said David Certner, legislative policy director at AARP, which supports the proposal. “But the advisor needs to be doing it in the best interest of their clients.”Don’t miss these stories from CNBC PRO: More

Tax identity theft victims are waiting roughly 19 months for the IRS to process returns and send refunds, according to the National Taxpayer Advocate.
In fiscal 2023, shifted resources have contributed to the problem as the agency has prioritized areas such as phone service.

Erin Collins, national taxpayer advocate at the Taxpayer Advocate Service, speaks at a Senate Appropriations subcommittee hearing in Washington, D.C., on May 19, 2021.
Bloomberg | Bloomberg | Getty Images

After a few difficult years, the IRS has boosted taxpayer service and technology with an infusion of funding. But there’s still room for improvement — especially for tax identity theft victims, according to the agency’s internal watchdog.
The National Taxpayer Advocate on Wednesday released its annual report to Congress, which cited “unconscionable delays” in IRS support for victims of tax-related identity theft.

“Individuals who are victims of tax-related identity theft are waiting an average of nearly 19 months for the IRS to process their returns and send their refunds,” wrote National Taxpayer Advocate Erin Collins.
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Shifted resources contributed to “unreasonable” delays for identity theft victims and returns flagged for possible identity theft, according to the report. During fiscal 2023, the IRS reassigned 572 workers to focus on telephone service.
The agency’s Identity Theft Victim Assistance program had 294,138 individual case receipts during fiscal 2023, up from 92,631 in 2019. Resolution times have skyrocketed to 556 days, which far exceeds the agency’s 120-day goal.
“It’s too early to tell what the new tax filing season will bring, but with a record number of data breaches reported in 2023 flooding identity markets with more personal information, it’s likely we’ll see more attempts to impersonate tax filers this year,” said James Lee, chief operating officer of the Identity Theft Resource Center.

“The Taxpayer Advocate raises a number of very important areas that we are looking at to make improvements under our strategic operating plan with Inflation Reduction Act funding,” IRS Commissioner Danny Werfel said in a statement. 
“Many of these issues identified in her report ultimately depend on adequate IRS resources,” he said. “This is another reason why the Inflation Reduction Act funding and our annual appropriations are so critical to making transformational changes to the IRS to help taxpayers and the nation.” 
The comments come as Congress faces a looming government shutdown deadline, with negotiations for possible IRS funding cuts.

Tax identity theft often affects lower earners

With many Americans relying on tax refunds, these delays can create financial hardship, particularly for lower earners claiming the earned income tax credit. Some 69% of taxpayers with resolved identity theft cases had adjusted gross incomes at or below 250% of the federal poverty level, IRS data shows.
“The IRS should do everything possible to timely assist these victims and provide them with the peace of mind that the IRS is looking out for their best interests and protecting their rights,” Collins wrote.

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Consumer spending has remained remarkably resilient, but that’s unlikely to continue, says Jack Kleinhenz, chief economist at the National Retail Federation.
Recent reports already show signs of strain.

Consumer spending remained remarkably resilient throughout 2023, even in the face of prolonged inflation and high interest rates.
But that’s unlikely to continue, according to Jack Kleinhenz, chief economist at the National Retail Federation.

“A year ago, many commentators were skeptical and calling for a recession, but the recession never came. With each passing month, consumers kept spending despite inflation and higher borrowing costs.””Nonetheless, those tailwinds are not necessarily sustainable,” Kleinhenz said in the January issue of NRF’s Monthly Economic Review, released Tuesday.
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Recent reports already show signs of strain.
In the last year, credit card debt spiked to a record high, surpassing $1.08 trillion, according to the latest quarterly report from the Federal Reserve Bank of New York.
Now, more cardholders are carrying debt from month to month and fewer are able to pay off their balances in full.

“We are still largely a paycheck-to-paycheck nation,” said Mark Hamrick, senior economic analyst at Bankrate.

We are still largely a paycheck-to-paycheck nation.

Mark Hamrick
senior economic analyst at Bankrate

So far, consumers have been sustained by very low unemployment. December’s jobs report closed out 2023 with another solid hiring gain while the unemployment rate held at 3.7%. Still, economists surveyed by Bankrate expect much slower payrolls growth in the months ahead with the jobless rate edging above the 4% level.
“The labor market looks set to cool further this year, which will impact consumer expectations for employment and wage growth, and, in turn, affect spending decisions,” Kleinhenz said. “Spending is elevated relative to current income, and maintaining the recent pace of growth will be increasingly difficult.”
What the Federal Reserve will do with interest rates is key to determining borrowing costs and credit conditions going forward, Kleinhenz added. The central bank has already indicated as many as three cuts coming this year. However, even then, credit card APRs aren’t likely to improve much. 
“Amid all the optimism about what the Federal Reserve might do this year, the high cost of debt is with us for the foreseeable future,” Hamrick said. More

Representations of cryptocurrency Bitcoin are placed on a PC motherboard in this illustration taken June 16, 2023. 
Dado Ruvic | Reuters

Crypto investors are waiting for the Securities and Exchange Commission to approve a raft of spot bitcoin applications, likely Wednesday
With a spot bitcoin ETF now looking very real, attention is turning to the details of how it will trade, how much it will cost, how much of the runup in bitcoin is due to demand that has been pulled forward, and premium or discount valuations.
Fees are competitive and will get more so

With nearly a dozen ETFs competing for attention, bitcoin buyers will be very price sensitive, and issuers are already engaged in a modest price war. For example, Cathie Wood’s ARK Invest, which is partnering with 21Shares to launch a bitcoin ETF, initially announced a fee of 0.8% but on Monday announced no fee for the first six months.
Other issuers are also steeply discounting prices, with several (Bitwise, ARK, Invesco) offering 0% fee for the first six months, while Grayscale is charging 1.5%.
Spot bitcoin ETF feesBitwise (GBTC) 0.0% (after first six months: 0.24%)ARK Invest/21Shares (ARKB): 0.0% (after first six months: 0.25%)Invesco Galaxy Bitcoin ETF (BTCO) 0.0% (after first six months: 0.59%)iShares Bitcoin Trust (IBIT) 0.20% (after first 12 months: 0.30%)VanEck Bitcoin Trust (HODL) 0.25%Franklin Templeton Digital Holdings Trust 0.29%Fidelity Wise Origin Bitcoin Trust (FBTC) 0.39%WisdomTree Bitcoin Trust (BTCW) 0.50%Valkyrie Bitcoin Fund (BTF) 0.80%Grayscale Bitcoin Trust (GBTC) 1.50%
Invesco’s Galaxy Bitcoin ETF has set its expense ratio at 0.0% for the initial six months and the first $5 billion in assets, and goes to 0.59% after.
How will a spot bitcoin trade relative to bitcoin and bitcoin futures?
One of the main questions is how well a spot bitcoin ETF will track bitcoin and bitcoin futures.

Simeon Hyman, ProShares’ global investment strategist who manages the largest bitcoin futures ETF, the ProShares Bitcoin Strategy ETF (BITO) that launched in October 2021, noted that bitcoin futures ETFs have tracked bitcoin “fairly well.” But he also told me, “The spot market for bitcoin is still not mature. The futures market is regulated and mature. We’ll have to wait and see how well they track against each other.”
Another issue is whether the bitcoin ETFs will trade at a premium or discount to their net asset value. In this case, the NAV is the value of the bitcoin owned by the ETF. Some are concerned that the creation and redemption process that was agreed upon to create spot bitcoin ETFs could result in a bitcoin ETF trading at a premium to its NAV.

“Some of these ETFs will trade at a premium, and then as investors start to understand the nuances, that’s when we will filter out the nuances and the small points,” Reggie Brown, GTS co-Global Head of ETF Trading & Sales, told Bloomberg.
Most market participants believe that any premiums will be small.
Som Seif runs the Purpose Bitcoin ETF, the first bitcoin ETF to launch in Canada in 2021.
“Our product trades extremely efficiently, with very tight spreads,” Seif told me. “You should see no impact on trading efficiency. There will be a breadth of players, and the underlying asset is very liquid.”
Matt Hougan, CIO of Bitwise Asset Management, one of the applicants for a bitcoin ETF, agreed: “The underlying market is very liquid,” he told me. “We have been in the market buying and selling bitcoin for years. The main issue are, who gets the liquidity, and who wins on expenses.”
How much money will these ETFs attract?
It’s not clear how much new money will be dragged in once a spot bitcoin ETF trades.
However, two ETF-related events have helped propel interest in bitcoin in the last two years:
1) The beginning in trading of bitcoin futures ETFs (BITO), starting in October 2021, which helped move bitcoin from almost $10,000 in October of that year to over $40,000 by January 2022. The largest bitcoin futures ETF, ProShares bitcoin Strategy ETF (BITO), recently passed $2 billion in assets under management, according to ProShares.
2) Blackrock’s application for a bitcoin ETF on June 16, 2023, helped moved bitcoin from roughly $25,000 to $30,000 in a matter of days.
Brown estimated that the combined ETFs could have fairly significant inflows. “Thirty days out, it could be $2 billion-$3 billion,” he told Bloomberg, estimating it could attract $10-$20 billion in new assets this year.
Still, considering the current market capitalization of bitcoin is near $900 billion, that is not huge inflows. The Canadian spot bitcoin ETF, the Purpose Bitcoin ETF, has about $400 million in assets after over two years.
What’s next?
The next issue, Hougan says, is whether the big institutions and financial advisors will allow their investors to trade bitcoin on their platforms.
“Just because a bitcoin ETF has been launched, it doesn’t mean JP Morgan will get in,” Hougan said.
After that, Hougan said the next big events will be the bitcoin halving in April, followed by any interest rate cuts from the Federal Reserve.
“Higher interest rates are bad for non-yielding assets like bitcoin or gold,” he told me. “If you get 5% on cash, that’s tough competition.” More

Roughly a month after Shohei Ohtani’s $700 million Los Angeles Dodgers contract, California’s controller is asking Congress for restrictions on deferred income.
However, with split control of Congress, there’s unlikely to be a near-term change to the federal tax law, experts say.

Japanese baseball player Shohei Ohtani attends a press conference on his presentation after signing a 10-year deal with the Los Angeles Dodgers at Dodgers Stadium in Los Angeles, California, on Dec. 14, 2023.
Frederic J. Brown | AFP | Getty Images

Roughly a month after Shohei Ohtani signed a $700 million contract with Major League Baseball’s Los Angeles Dodgers, California’s controller is calling for “immediate and decisive action” from Congress to limit deferred income for higher earners.
The Japanese pitcher’s record-breaking deal defers $680 million for 10 years and has raised questions about future state taxability — especially if Ohtani eventually leaves California. For 2024, California’s top tax rate is 14.4%, which includes a 1.1% payroll levy.

“The current tax system allows for unlimited deferrals for those fortunate enough to be in the highest tax brackets, creating a significant imbalance in the tax structure,” California State Controller Malia Cohen said in a statement Monday referencing Ohtani’s contract. 
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“The absence of reasonable caps on deferral for the wealthiest individuals exacerbates income inequality and hinders the fair distribution of taxes,” she said. “I would urge Congress to take immediate and decisive action to rectify this imbalance.”
Deferring $68 million annually for 10 years could save Ohtani $98 million over the life of his contract, according to an estimate from the California Center for Jobs and the Economy. However, the estimate uses several assumptions, and the exact terms of Ohtani’s contract are unknown. 

While California’s controller calls for restrictions on deferred income, that may not be the source of the problem, according to Steve Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center.

“What’s really going on here is a federal law that was enacted in 1995 by a Republican Congress to prevent states from taxing pension income,” he said. “The problem with Ohtani is he can return to Japan and sidestep California taxes.”
The provision prevents states from taxing nonresident “retirement income,” which can include deferred compensation.

Deferred income hasn’t been a priority for Congress

While some Democrats have called for higher taxes on the wealthy, lawmakers have focused on areas such as so-called unrealized gains, or investment growth, rather than deferred income, said William McBride, vice president of federal tax policy at the Tax Foundation.  
“Deferred income runs throughout the tax code,” such as income from your 401(k) or executive compensation, he said.
If Congress enacted restrictions on deferred income, it would “put the state in a worse position in terms of its ability to collect revenue from these high earners and star athletes because they wouldn’t be there,” McBride said.

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