The spectre of contract voidance will continue to hang over suspended Wizards guard Gilbert Arenas, especially given the franchise's response to commissioner David Stern's announcement. But that's deep in the future, and this is now. And now, this season, the Wizards could save more than $5 million in luxury taxdue to Gil's Goldmember/finger guns performance art exhibition.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.
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