A team like the Minnesota Timberwolves has the disadvantage of not just very cold weather but a smaller fan base, compared to say the New York Knicks. Attracting a top free agent to Minnesota can be extremely difficult, particularly when the team lacks a history of winning. Smaller market teams wanted assurances that they could still compete with clubs like New York when it came to inking new talent.
Teams like the Knicks and the Los Angeles Lakers have mega television deals that have allowed them to sign long-term lucrative deals and cover their luxury tax bills. But the new CBA has built in more strict and expensive taxes to make teams think twice about going over.
The new tax penalties kick in starting next season, and are broken up into tiers. The repeater rate does not apply until the 2014-15 season, but increases each amount a team must pay for every dollar spent above the salary cap.
The penalties for non-repeater rates go:
$0 to $4.9 million over pays a rate of $1.50 for every dollar above the cap
$5 million to $9.9 million over pays a rate of $1.75 for every dollar above the cap
$10 million to $14.9 million over pays a rate of $2.50 for every dollar above the cap
$15 million to $19.9 million over pays a rate of $3.25 for every dollar above the cap
$20 million and above pays $3.75 and an additional $.50 for every additional $5 million
Teams will have to pay a maximum amount if they completely blow by a tier, increasing from $7.5 million to $8.75 million, then $12.5 million and $16.25 million respectively. This year’s cap is $70.307 million, and next season’s will be roughly the same.
Teams are discussed below in order of their expected payrolls for next season, and thus how much tax they will have to fork over under the new cap rules. Not every team has contracts committed above the cap next season, and one that has been tied to recent trades, the Boston Celtics, are listed because they could tick up into a tax tier if they take on another contract for next season.
Brooklyn Nets $89.5 million
Expected Tax: 7.5 + 8.75 + 12.5 + 14.625 = $43.4 million
Nets billionaire owner Mikhail Prokhorov has publicly stated that he is willing to spend to capture a title. The Russian, now in his second year at the top, will cut the biggest tax check of any owner if Brooklyn keeps its current roster. Guards Joe Johnson and Deron Williams along with center Brook Lopez and forwards Gerald Wallace and Kris Humphries account for $76 million of next season’s salaries.
The Nets haven’t been linked to much recemt trade chatter, but if Prokorhov suddenly becomes frugal, they could try to unload a contract or two.
Miami Heat $85.6 million
Expected Tax: 7.5 + 8.75 + 12.5 + 5.2 = $34 million
One title in two years, and the Heat are certainly going to pay for it. LeBron James, Dwyane Wade, and Chris Bosh make up the bulk of the contracts, leaving team president Pat Riley to routinely bring in any free agent looking to snag a ring late in their career, or an under-the-radar rookie at a cellar price.
Ray Allen has a player option for $3.3 million next season, and then Mike Miller, James, Wade, and Bosh can also opt out in the summer of 2014. "The Big Three" could re-negotiate their contracts then, but won’t drop their price if they manage to capture at least one more ring. Still the Heat run the risk of paying the repeater rates unless they can pare down spending.
L.A. Lakers $78.1 million
Expected Tax: 7.5 + 5.425 = $13 million
Kobe Bryant’s contract expires after next season, and he’ll collect nearly $30.5 million, accounting for a huge chunk of the team’s payroll. Pau Gasol will be on the last year of his deal, and is scheduled to make about $19.3 million. L.A. could move Gasol next year with his bloated expiring contract, as the Lakers attempt to get younger.
But that will also hinge on team general manager Mitch Kupchak’s ability to re-sign center Dwight Howard. The Lakers have been in a downward spiral this season, and Kupchak will have to assure Howard that the team will compete long after Bryant leaves.
New York Knicks $76.4 million
Expected Tax: 7.5 + 2.45 = $10 million
This number would’ve been far higher if New York had re-signed Jeremy Lin or matched Toronto’s offer sheet to Landry Fields.
Carmelo Anthony, Amare Stoudemire, and Tyson Chandler make up $57 million of next season’s salaries, but the Knicks won’t part with Anthony or Chandler, and can’t seem to unload Stoudemire’s deal due to his injury history and uninsured contract. Marcus Camby's three-year deal also clogs up New York's books. Add in his age, and Camby is practically untradeable.
Golden State Warriors $74.8 million
Expected Tax: $6.75 million
David Lee and Andrew Bogut's deals make up most of the Warriors' payroll, but in 2014 they'll have upwards of $50 million in space. Forward Richard Jefferson and center Andris Biedrins have player options for a combined $20 million next season, which they are expected to use. But Golden State should still avoid the repeater rates after next year.
Orlando Magic $73.9 million
Expected Tax: $5.4 million
The bulk of Orlando’s contracts are made up of mid-level players (Jameer Nelson, Arron Afflao, Al Harrington, Glen Davis) and the $12 million player option Hedo Turkoglu will almost assuredly pick up since he won’t get that kind of money from any other team this coming summer.
However, beyond next season, Orlando will have a payroll less than a third of this season's. That much cap room, along with sunny shores, and no Florida state income tax will make them big players during free agency in 2014.
Chicago Bulls $73.2 million
Expected Tax: $4.35 million
Chicago’s biggest decision will be whether or not to re-sign Luol Deng. Deng’s deal ends after next season, but should they give him an extension, the Bulls run the risk of paying the repeater rate.
Given their market size, owner Jerry Reisndorf could probably afford the tax, but may be unwilling to pay it.
Memphis Grizzlies $72.4 million
Expected Tax: $3.15 million
The new rules are the main, if not the only, reason why Memphis has shopped Rudy Gay around the league. Gay is scheduled to make $17 million next season, and if he comes off the books, the Grizzlies can avoid the luxury tax altogether, and make room for free agents in 2014.
Though moving Gay would still require them to take on a contract, and may defeat the purpose of a trade.
Denver Nuggets $72 million
Expected Tax: $2.55 million
Andre Igoudala should exercise his $15.9 million option, but after him, Denver has reasonable contracts. They may not offer Iggy an extension due to the repeater tax. Though JaVale McGee, Danilo Gallinari, and Wilson Chandler offer a solid core, and second-year forward Kenneth Faried might make Igoudala expendable.
Boston Celtics $69.9 million
Expected Tax: N/A
The Celtics are just under the cap, and it could be less with Paul Pierce’s $15.3 million deal not entirely guaranteed. However, should Boston continue to flirt with the idea of trading for Sacramento’s DeMarcus Cousins, they will venture into luxury tax territory.