How a Lower Luxury Tax Could Kill 10 NBA Teams
As such, the league's salary cap could very well decrease substantially next season. With it, the luxury tax threshold would be lowered. Unfortunately, a lot of teams already have a ton of salary doled out for 2009-10 and beyond. And if the line moves downward significantly, roughly 10 teams hoping to be under the tax could find themselves in a world of hurt.
You know how we do things: with pictures. Thanks to DraftExpress.com's salary database, we were able to lay out the current payroll structures for next year's NBA teams. Most pre-financial meltdown projections had the luxury tax around $72 million. There's no word how low it could go given the economic conditions; we'll guess $65 million for the sake of example.
Just on the surface, that decrease in the luxury tax threshold would put five teams not currently expected to be over the tax in harm's way. (In case you're not clear on why the tax is so harmful: teams must pay the league $1 for every dollar over the tax line they sit; this money is distributed to non-tax teams. By being one penny over the line, you lose about $3 million in pay-out cash right away ... plus that 100% tax penalty. It's brutal.)
But it's worse than that. Teams below the potential new tax line will probably sign free agents or draft picks. Philadelphia, for example, has no starter level point guard (except combo guard Lou Williams) signed for 2010. Portland and Detroit are expected to play in the market; already thin Atlanta has to deal with restricted free agents Marvin Williams and Josh Childress.
But perhaps this is all more troublesome for teams like Washington, Phoenix, Utah and Denver -- teams already expected to be over the tax. With the previously anticipated tax line, the Wizards (second worst team in the league) needed to cut $4-5 million off their 2009-10 payroll to slip under the tax threshold. Not necessarily easy, but not a pending apocolypse. If the threshold falls to $65 million, Washington suddenly has $11 million in salary to cut, and one year to do so.
And the team will win less than 20 games this season.
Phoenix is trying desperately to exile a 26-year-old all-NBA first-teamer to get under the line. Think about that. This isn't solely a product of Robert Sarver's fidgety ways, or some sort of bad juju in the Valley of the Sun. Multiple teams might be doing this by next February. San Antonio cannot pay the tax -- let alone a few million in tax. Could Tony Parker or an expiring Manu Ginobili hit the fire sale trade market? Denver has a ton of salary tied up in four players, one of which (Kenyon Martin) you couldn't sell for a second-round draft pick in this climate. Unless Stan Kroenke can take a big hit, the Nuggets may very well be forced to pawn off Nene, 'Melo or B-b-b-billups.
We're waiting for New Orleans to break up a team that came a game away from winning the No. 1 seed in the West last season because of the 2009-10 luxury tax, and that's incredibly sad. Multiple that by 10, and that's what we could very well get over the next season. If you hated all the Summer of '10 manuvering because the trades focuses on cap space instead of talent, imagine how you'll feel when a third of the league is making moves not for talent, not for cap space ... but to save their owners a few million bucks.
This will be ugly, friends.