02-15-2022, 05:55 PM
I thought I'd spend some time talking through what the actual numbers are when Cuban mentions being in Luxury Tax Hell next season.
The line is estimated to be $147mm next season. The LT rates are like your personal tax bracket in that the more you make, the higher your bracket. If you search for NBA Salary Tax Calculator, you can plug in numbers for yourself.
As things stand right now, we have 15 slots committed for next season without Brunson. This includes our pick and the non-guaranteed deals for Maxi and Frank. If you start there as your baseline, The Mav's are at $152,835,957 (numbers from Spotrac). It isn't that bad. As a non-repeater, the tax for being $5.8mm over the line is $8.9MM (you are in the 1.75% tax bracket with a blended rate of 1.53%).
For the sake of argument, lets instead draft a Euro-stash and sign Brunson into that 15th slot (I'll use $19mm as the starting number). Total salaries jump to $169,583,457 and the tax is $54.7mm...WOW! The reason is we are now $22mm over the line and suddenly the rates jump. The marginal rate is 3.75% and the average rate is 2.42%. Now things are starting to get painful. One way of looking at this is signing Brunson in that first year costs Mark his $18mm salary plus an EXTRA $45.8mm in tax or $62.8mm.
Sorry, but I just don't see it. Options?
1. Don't sign Brunson. Yeah, that's probably a bad idea.
2. S&T Brunson to a cap room team and take back a TPE for his starting salary. If Cuban was willing to spend and Brunson left anyway, this at least provides a path to replacing Brunson. If he was just being cheap, then he isn't going to spend the TPE as it just racks up the tax bill and he should have kept Brunson.
3. S&T him to NY who sends back D. Rose who is a match for both sides of the BYC calculation. This at least gives you a body to play the role for a year with a TO for the next season. Rose at $14.5mm instead of Brunson at $19mm saves $15.8mm in tax.
I don't think anyone wants to lose Brunson over money, but it may not be the Mav's choice...it is JB's. But, assuming JB stays, someone else almost HAS to go, right? Here are two ways of doing that and the tax impact:
1. Pay Brunson $19mm, Euro-stash the pick and dump non-guaranteed Maxi? Tax is $24.6mm, but now you have to use the TP-MLE of $6,149,000 to replace Maxi. Great...except you are adding almost $20mm in tax to do it. Bottom line is Maxi has to be replaced and doing so is almost as expensive as keeping Maxi (BTW, don't count on Dallas spending any exception money).
2. Trade a player for someone making $5mm less. For instance, trade for someone making $14+mm instead of $19+mm and the LT goes down $16mm-$19mm depending on what else is going on. That is a big savings, but difficult to execute as the shopping list of players making the right amount less is pretty narrow. It is probably more powerful if you pile some salaries together and get to the 125% + $100k rule.
3. Trade someone with a larger salary into space. I don't think you can rehab the values of Dinwiddie or Bertans that quickly, so there is only one choice in my mind...the guy we are playing without for the next few months anyway. If you send off the pick plus THJ, you are only $2.9mm over the LT line. The tax there is $4.4mm.
It seems obvious THJ is gone if Brunson stays (unless the new cap guru has magical powers). The good news is it is a bad free agent class and several teams have space. Detroit, Orlando and Indy even have reasons to either bring home a hometown hero or reunite Tim with a former coach. Do you rush him back and hope he lights it up in the playoffs? Or, do you hold him back fearing he might further destroy his value with a bad showing or additional injury? Will someone take such a deal straight up and call THJ their "FA signing"? Or, does it cost us a pick or maybe a swap back into the early 2nd for our first (which saves some more money).
The side benefit of a 'Tim for Air' move is we are again creating a nice TPE, but this time the tax cost for using some of it would be much less. If not the TPE, the TP-MLE is back on the table as we are talking a 1.5ish rate instead of a 3.5ish rate if Tim is gone. Obviously it doesn't have to be a deal for air. But if you are trade-matching a deal for Hardaway, you better be getting back a REALLY good player to justify the kind of tax you'll have to pay for that player and Brunson. Be Prepared!
The line is estimated to be $147mm next season. The LT rates are like your personal tax bracket in that the more you make, the higher your bracket. If you search for NBA Salary Tax Calculator, you can plug in numbers for yourself.
As things stand right now, we have 15 slots committed for next season without Brunson. This includes our pick and the non-guaranteed deals for Maxi and Frank. If you start there as your baseline, The Mav's are at $152,835,957 (numbers from Spotrac). It isn't that bad. As a non-repeater, the tax for being $5.8mm over the line is $8.9MM (you are in the 1.75% tax bracket with a blended rate of 1.53%).
For the sake of argument, lets instead draft a Euro-stash and sign Brunson into that 15th slot (I'll use $19mm as the starting number). Total salaries jump to $169,583,457 and the tax is $54.7mm...WOW! The reason is we are now $22mm over the line and suddenly the rates jump. The marginal rate is 3.75% and the average rate is 2.42%. Now things are starting to get painful. One way of looking at this is signing Brunson in that first year costs Mark his $18mm salary plus an EXTRA $45.8mm in tax or $62.8mm.
Sorry, but I just don't see it. Options?
1. Don't sign Brunson. Yeah, that's probably a bad idea.
2. S&T Brunson to a cap room team and take back a TPE for his starting salary. If Cuban was willing to spend and Brunson left anyway, this at least provides a path to replacing Brunson. If he was just being cheap, then he isn't going to spend the TPE as it just racks up the tax bill and he should have kept Brunson.
3. S&T him to NY who sends back D. Rose who is a match for both sides of the BYC calculation. This at least gives you a body to play the role for a year with a TO for the next season. Rose at $14.5mm instead of Brunson at $19mm saves $15.8mm in tax.
I don't think anyone wants to lose Brunson over money, but it may not be the Mav's choice...it is JB's. But, assuming JB stays, someone else almost HAS to go, right? Here are two ways of doing that and the tax impact:
1. Pay Brunson $19mm, Euro-stash the pick and dump non-guaranteed Maxi? Tax is $24.6mm, but now you have to use the TP-MLE of $6,149,000 to replace Maxi. Great...except you are adding almost $20mm in tax to do it. Bottom line is Maxi has to be replaced and doing so is almost as expensive as keeping Maxi (BTW, don't count on Dallas spending any exception money).
2. Trade a player for someone making $5mm less. For instance, trade for someone making $14+mm instead of $19+mm and the LT goes down $16mm-$19mm depending on what else is going on. That is a big savings, but difficult to execute as the shopping list of players making the right amount less is pretty narrow. It is probably more powerful if you pile some salaries together and get to the 125% + $100k rule.
3. Trade someone with a larger salary into space. I don't think you can rehab the values of Dinwiddie or Bertans that quickly, so there is only one choice in my mind...the guy we are playing without for the next few months anyway. If you send off the pick plus THJ, you are only $2.9mm over the LT line. The tax there is $4.4mm.
It seems obvious THJ is gone if Brunson stays (unless the new cap guru has magical powers). The good news is it is a bad free agent class and several teams have space. Detroit, Orlando and Indy even have reasons to either bring home a hometown hero or reunite Tim with a former coach. Do you rush him back and hope he lights it up in the playoffs? Or, do you hold him back fearing he might further destroy his value with a bad showing or additional injury? Will someone take such a deal straight up and call THJ their "FA signing"? Or, does it cost us a pick or maybe a swap back into the early 2nd for our first (which saves some more money).
The side benefit of a 'Tim for Air' move is we are again creating a nice TPE, but this time the tax cost for using some of it would be much less. If not the TPE, the TP-MLE is back on the table as we are talking a 1.5ish rate instead of a 3.5ish rate if Tim is gone. Obviously it doesn't have to be a deal for air. But if you are trade-matching a deal for Hardaway, you better be getting back a REALLY good player to justify the kind of tax you'll have to pay for that player and Brunson. Be Prepared!
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