The biggest surprise of the Vladimir Guerrero Jr. extension is not that he landed a $500 million deal from the Toronto Blue Jays without going to free agency.
No, the shocker is that the contract includes a $325 million signing bonus, according to sources briefed on the deal. Guerrero, 26, will receive the remaining $175 million in salary.
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That’s right, the Jays will pay out 65 percent of Guerrero’s contract in signing bonus. Both the signing bonus and salary will be distributed in varying annual amounts over the 14-year term of the deal.
Baseball’s collective-bargaining agreement does not restrict the amount a team can include in a signing bonus. The bonus, however, is included in the calculation of a player’s average annual value for luxury tax purposes. Including salary, Guerrero’s annual luxury-tax hit will be $35.71 million.
For Guerrero, the benefit of getting the bulk of his money in signing bonus would appear twofold. Signing bonuses are allocated to an athlete’s state of residence. Guerrero resides in Florida, a state without income tax. So, he presumably will avoid paying state tax on the bonus, generating millions in savings.
The other benefit is that signing bonuses are not contingent on the performance of services. Guerrero would receive his annual payout if Major League Baseball canceled games due to a work stoppage, a possibility that exists after the sport’s collective-bargaining agreement expires on Dec. 1, 2026. He also would receive it if the league canceled games for some other reason, such as a pandemic.
The benefit to the Blue Jays in paying out more in signing bonus than salary – if it exists at all – is unclear.
Within 30 days, Guerrero will receive an initial signing bonus payment of $20 million. But because his deal runs from 2026 to ‘39, that money will not count against the Jays’ luxury-tax payroll this season. The CBA states that a signing bonus only applies to the luxury-tax payroll during the guaranteed years of the contract.
(Top photo of Vladimir Guerrero Jr.: Mark Blinch/Getty Images)
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