The Thunder trading can teach us a few things about the impact of the new collective bargaining agreement. The Thunder traded James Harden to avoid the new punitive luxury tax.
The new tax makes a team pay $1.50 ever dollar over the tax for the first 5 million over the tax. However, if a team is more than 5,000,000 over the tax they pay $1.75 for each dollar up to 9.999 million and then $2.50 for every dollar from 10 million to 14.999 million and $3.25 for every dollar over 15 million. Moreover, if you are over the tax for three straight years you pay an extra dollar per dollar.
The impact of the new CBA as was intended is that luxury tax is penalizing enough to prevent teams from being willing to pay going over the threshold.
This becomes very important for the Utah Jazz as they try to sign all 4 young players for the core will also dealing with the potential re-signing of 8 different free agents this year.
The Thunder extended Kevin Durant, Russell Westbrook and Serge Ibaka making James Harden the man left out. Next year, Durant and Westbrook who both signed something close to the max have a combined 32.4 million salary and up to 36.8 by 2015-16. Add on Serge Ibaka of 12.25 million and the Thunder is at 44.6 million with 3 players.
James Harden wanted the max deal of around 14 million. This would have pushed the Thunder to 58.6 million in 4 players . Add on the ill-advised Kendrick Perkins contract of 25 million over the next three years (this is the real story) and they would have been near 67.5 million for 5 players and thus bordering on the luxury tax.
The only players they would have on their roster are rookie contracts and minimum players . The killer here is they would have needed at least another 8 player almost certainly pushing them over the $80 million number and putting them into near 20 million in luxury tax on top of the payroll and after three years that would be come 30 million of tax or more.
What is unclear to me is what the Thunder planned to do if Harden had agreed to the deal they presented at 52 million over the next 4 years. Starting around 11 million next season they would have still been at 64 million for 5 players.
NOTE – There is a google document to go with this section
The Jazz have some incredible decisions to make in the upcoming years. They have 4 players coming up on extensions and they have 9 players who are free agents.
The year to focus on is 2014-15 when the Jazz will have had to decide what to do with all of the young players. The Jazz should not have any tax issues in 2013-14.
Word around the league is the tax will increase 2 to 3 million a year over the next period of time. In my projections we will be conservative and out it at 2 million a year.
The first thing that has be figured out is how much can you pay the 4 youngsters and then this will allow you know what you can pay the players to surround them.
Durant and Westbrook were max players earning between 15 and 18 million dollars a year. None of the Jazz players look to be max players at this point. Yet, in this off-season from July 1 to October 31st the Jazz will have a chance to sign Derrick Favors and Gordon Hayward to extensions.
Recent contracts can give us some idea of what players are going to get paid. Let’s start with Derrick Favors. Roy Hibbert got the max in the off-season at $14 million when he went on the open market and Pacers were forced to match it. Kevin Love also received the max at 14 to 16 million a year. Brook Lopez received a deal from 13 to 16 million. Serge Ibaka got 12 million from the Thunder for 4 years. Atlanta’s Al Horford is earning 12 million a year and Marc Gasol is nearing 15 million, both those contracts were signed before the collective bargaining agreement.
Favors is not at the level of any of those players at this point, but he may be by the end of the season. Moreover. the Jazz need to give him a deal that is good enough that he decides not to go to the open market where someone is likely to spend big time money. Let’s put Favors down near 12 million.
Next on the list is Gordon Hayward. His best comps may be Danilo Gallinari at 10 million a year, Nicholas Batum who is near 11 million a year and keep a close eye on what DeMar DeRozan gets this off-season or as an extension. Let’s put Hayward down near 11 million.
If the Jazz could do this it is a significant difference to have those two players at 23 million rather than the Durant/Westbook combo of 33 million.
Kanter will be the next one on the list. He will need to be signed in the off-season of 2014 from July 1 to October 31st. Kanter is a big and all bigs seem to be earning around 12 million a year as I showed you with Favors.
That places the Jazz at 35 million for three players. This again is far better than the Thunder who were at 45 with three players.
Moreover, all of three of these would not be on the books until 2015-16 giving the Jazz a decent amount of flexibility in the next two years.
If the Jazz can get these three done between 35, they would have 35 million to pay the remaining 11 players on the roster before going over the tax. Of course, if it takes 40 million the Jazz get into Thunder territory very quickly trying to finish the roster with 11 players and 30 million.
I have not forgotten Alec Burks I just believe he may fall into the next tier of decisions. If Burks emerges he is probably somewhere between 7 million and 10 million a year. This is the same place Paul Millsap, Marvin Williams and Mo Williams fall into. Al Jefferson is earning 14 million and some people believe he can get that on the open market this off-season.
When all these salaries kick in is the key here. For 2013-14 the Jazz could re-sign Millsap, Mo and Marvin all around 9 million a year without any problem. Then the Jazz could have each of those players salaries decrease by 7.5% as their belts get tighter.
For 2013-14 the Jazz have room to sign a free agent but any long term deal pushes the Jazz toward the tax in the upcoming years.
In 2014-15 with Hayward and Favors under new deals the Jazz start to walk toward tax issues. If the Jazz re-sign the 3 M’s, Millsap, Mo and Marvin. Coupled with two years of first round picks and the Warriors pick the Jazz would be at 63 million for 11 players.
The Jazz should be able to sign a free agent to a 2 year contract with some cap space in the off-season and more than one if they renounce the rights to some of their major free agents.
All of this is being done with the assumption Al Jefferson is too expensive. However, the Jazz could re-sign Al instead of Millsap and one of either Mo, Marvin or a market free agent and still use the mid-level to get a 4 million dollar a year player with going over the tax.
Things begin to get very tight in 2015-16.
When you add a 12 million dollar a year extension to Kanter and a 8 million a year to Burks the Jazz start running up some huge numbers. If the Jazz extend all 4 and they will be near 44 million in salary for 4 players, then if the Jazz have also re-signed Millsap, Marvin and Mo to three year deals and they have 4 first round picks they are at 72 million for 11 players. The Jazz add two minimum players and they should be able to stay under the tax.
This is actually encouraging. However, if they want to sign Al they would be deep into the tax in 2015-16 if they also sign Mo and Marvin. If Favors is a max extension with Millsap, Mo and Marvin signed the Jazz are at 79 million and over the tax.