Arenas Suspension Could Save Wizards $5 Million This Season
Players suspended by the league don't earn a salary. Their pay goes to charities chosen by the NBA and its players' union. But there's a real benefit to team: only 50 percent of a suspended player's salary counts as team salary in cap and luxury tax calculations.
Arenas was due to be paid $16.2 million this season. The Wizards have 50 games left this season, 61 percent of the campaign. That means Arenas will lose out on $9.9 million. Of that, 50 percent -- $4.9 million -- can be taken off the Wizards' payroll. Since the Wizards are well over the tax threshold, that turns into immediate savings. The NBA's luxury tax punishes high-spending teams by charging a dollar-for-dollar tax for player payroll over a certain level (61 percent of the league's basketball-related income per team, or roughly 120 percent of the salary cap).
As that $4.9 million is removed from the Wizards' player payroll (assuming Arenas's suspension isn't lifted before the end of the year), Washington's total salary shrinks from $78.6 million to $73.7 million, according to figures published by ShamSports.com. That's still above the tax threshold, so Washington will still pay tax unless it can shed another $3.8 million in salary by the end of the season. But the tax bill, as of today and assuming a 50-game suspension, would be $3.8 million as opposed to the $8.7 million it would be without the suspension. Hence, the nearly $5 million in savings.
Further, as noted, it gets the Wizards a lot closer to the tax threshold. Cutting $4 million in salary at the deadline is a whole lot easier than slicing out $9 million. This could be the first domino in Washington avoiding the tax altogether this season, in which case the team would net the $3-5 million share of tax payments split among non-paying teams. Finger guns, the gift that keeps on giving!
Now where does the $9.9 million Gil is scheduled to lose go? Well, that's more complicated, as FanHouse's Jon Weinbach reported for the Wall Street Journal in 2005.