Cap & Lux Tax Figures

[Three34]

We should probably go ahead and stop with the idea that Jerome James is an instant financial saving. He won't be. The Knicks wanted him to be, banking on the theory that Jerome wouldn't be arsed to work hard to recover since he never works hard at anything. But they forgot one thing - Jerome tends to work hard once the money's run out. And he's in the final year of his contract. So this year is not the year he'll be slacking.

[jax98]

If you trade JJ to a team over the cap - they are still saving approx 5.3 million dollars. Nothing to sneeze at - but for a team like Utah it might be the difference between keeping or losing Millsap.

If it doesn't change the fact that their reported numbers are well into the luxury tax area, then they gain nothing from it. They save $5.4 million, but not on paper which is necessary for them to avoid the tax. Should they save $5.4 million, they would still lose out from a tax pespective:

- They won't get the average tax hand-out every non-tax team gets every season

- They would likely be over the tax by more than $3 million, so what they pay in tax won't be covered from the savings

I agree with your main point about a team still saving a large chunk of cash. But a team flirting with the tax territory is not likely, as such a move would still count towards them.

[Magilla_Gorilla]

If you trade JJ to a team over the cap - they are still saving approx 5.3 million dollars. Nothing to sneeze at - but for a team like Utah it might be the difference between keeping or losing Millsap.

If it doesn't change the fact that their reported numbers are well into the luxury tax area, then they gain nothing from it. They save $5.4 million, but not on paper which is necessary for them to avoid the tax. Should they save $5.4 million, they would still lose out from a tax pespective:

- They won't get the average tax hand-out every non-tax team gets every season

- They would likely be over the tax by more than $3 million, so what they pay in tax won't be covered from the savings

I agree with your main point about a team still saving a large chunk of cash. But a team flirting with the tax territory is not likely, as such a move would still count towards them.

The Jazz aren't flirting with the lux tax - they're already over. Your post I believe is operating under the assumption that they can find a trade to get them under the tax. If they can - great, but if that doesn't happen then JJ might be the next best thing.

They are already over the tax (by more than 2 million) and they have yet to fill all of their roster spots or sign either of their recently drafted rookies - so they're not getting the hand out anyways.

[cubd8]

It sounds as if the Bulls will have a convenient excuse of a bad economy should the free agents they most likely pursue (Stoudemire, Bosh, Johnson and Wade) stay with their own teams for more money.

[jax98]

The Jazz aren't flirting with the lux tax - they're already over. Your post I believe is operating under the assumption that they can find a trade to get them under the tax. If they can - great, but if that doesn't happen then JJ might be the next best thing.

Actually, I was working under the assumption of Tyrus and Jerome James for Boozer. That trade would save them close to $1 million and they'd be close to avoiding it.

Had you been able to remove $5.4 million from the books, Utah would be under the tax and have much more to work with in re-signing Millsap. But seing as how that's not the case, I made my point in saying they wouldn't do it. It brings them nowhere close to scramble money together to pay Millsap. Not even close.

They are already over the tax (by more than 2 million) and they have yet to fill all of their roster spots or sign either of their recently drafted rookies - so they're not getting the hand out anyways.

Which is exactly my point.

A team like Utah wouldn't take on JJ (as you suggested) when he doesn't offer them instant salary relief. $5.4 million off the cap = Hello Carlos Boozer.

[Magilla_Gorilla]

A team like Utah wouldn't take on JJ (as you suggested) when he doesn't offer them instant salary relief. $5.4 million off the cap = Hello Carlos Boozer.

5.4 million they don't have to pay - that they currently would - is salary relief in my opinion. Its not as much salary relief as dumping Boozzer outright, or if Jerome was ruled career ending - but its still 5.4 million they don't have to pay out of pocket.

[Happily married guy]

The mid-level exception is $5.854 million for the 2009-10 season and the minimum team salary, which is set at 75% of the Salary Cap, is $43.275 million.

Via Press Release

Is there any way that we can make use of the mid level exemption?

What is it an exemption from?

[jax98]

5.4 million they don't have to pay - that they currently would - is salary relief in my opinion. Its not as much salary relief as dumping Boozzer outright, or if Jerome was ruled career ending - but its still 5.4 million they don't have to pay out of pocket.

Yes, but when that $5.4 million doesn't change on paper, they're still going to be paying the tax. They gain nothing from it on paper, except save $5.4 million 'behind the scenes' - Is that good enough for them? IMO, no it's not. They would want salary relief to the point where they flirt with the tax, and won't be over it.

[Magilla_Gorilla]

The mid-level exception is $5.854 million for the 2009-10 season and the minimum team salary, which is set at 75% of the Salary Cap, is $43.275 million.

Via Press Release

Is there any way that we can make use of the mid level exemption?

What is it an exemption from?

It is an exception that allows teams over the salary cap to sign player/players for what is the average NBA salary.


The Bulls will not be using the MLE because doing so would push them into the luxury tax - essentially forcing them to pay double whatever they signed the player for.

[jax98]

You also have something called an LLE (Lower-Level Exception)

That's rougly $1.9 million which can be used on a maximum of two years. Grant Hill signed a full LLE two years ago. However, you cannot use the LLE if you already have one under contract.

[Magilla_Gorilla]

5.4 million they don't have to pay - that they currently would - is salary relief in my opinion. Its not as much salary relief as dumping Boozzer outright, or if Jerome was ruled career ending - but its still 5.4 million they don't have to pay out of pocket.

Yes, but when that $5.4 million doesn't change on paper, they're still going to be paying the tax. They gain nothing from it on paper, except save $5.4 million 'behind the scenes' - Is that good enough for them? IMO, no it's not. They would want salary relief to the point where they flirt with the tax, and won't be over it.

We're arguing two different arguments I suppose.


First - the 'on paper' argument. The Jazz are already over the cap. After they sign their rookie, and fill their last roster spot - they will be beyond 'flirting' with the tax. If they trade Boozer for the talked about Thomas/James it saves them about 1.5 million on the cap - but they are still at least 1.5 over - and still need to sign Millsap.

So unless they can find a team willing to absorb 10 million dollars in cap room - the Jazz are paying the tax. At this point they would see James as a savings of 5.4 million dollars that they do not have to pay.


If the Jazz can find a team willing to absorb 10 million then I agree - James is worthless. But he would have been worthless anyways if the Jazz could find a team willing to take Boozer for nothing.

[Addicted123]

Summer 2010 getting harder for teams.

http://sports.espn.go.com/nba/news/stor ... AHeadlines

The NBA's ballyhooed free-agent summer of 2010 might have quietly taken another hit late Tuesday night.

In a memo announcing next season's salary cap and luxury-tax threshold, sent out shortly before the league's annual July moratorium on signings and trades was lifted at 12:01 a.m. Wednesday, NBA teams also received tentative projections from the league warning that the cap is estimated to drop to somewhere between $50.4 million and $53.6 million for the 2010-11 season.

The official league memorandum, obtained by ESPN.com, forecasts a dip in basketball-related income in the 2009-10 season of 2.5 percent to 5 percent, which threatens to take the 2010-11 cap down some $5 million to $8 million from last season's $58.7 million salary cap.

[jax98]

We're arguing two different arguments I suppose.

Aren't we always?

First - the 'on paper' argument. The Jazz are already over the cap. After they sign their rookie, and fill their last roster spot - they will be beyond 'flirting' with the tax. If they trade Boozer for the talked about Thomas/James it saves them about 1.5 million on the cap - but they are still at least 1.5 over - and still need to sign Millsap.

I know. Which is why they wouldn't do it. My point in this is that IF JJ's contract could have 80% of it removed by insurance, Utah would take it as that would would put them under the tax, and into a place where they'd be 'flirting' with it.

But since that won't happen, they'd be tax payers after a Thomas/James for Boozer deal. Which is why I don't think they'll accept it.

So unless they can find a team willing to absorb 10 million dollars in cap room - the Jazz are paying the tax. At this point they would see James as a savings of 5.4 million dollars that they do not have to pay.

It's a question of paying the least tax possible. Jerome plus Tyrus doesn't help that, even if they save $5,4 million from JJ's contract. That contract will count as $6.6 million total on the cap. If Utah found a deal that gave them around $5 million worth on instant salary relief, that would be preferable for them.

If your argument is they can't, and because of that, this would be their best option, then I agree.

If the Jazz can find a team willing to absorb 10 million then I agree - James is worthless. But he would have been worthless anyways if the Jazz could find a team willing to take Boozer for nothing.

Given that JJ would count as $6.6 million, Utah wouldn't even have to find a team to give them $10 million in salary relief. If they got $5 million in instant relief, they'd gain a lot more flexibility than James + Thomas.

[Magilla_Gorilla]

Given that JJ would count as $6.6 million, Utah wouldn't even have to find a team to give them $10 million in salary relief. If they got $5 million in instant relief, they'd gain a lot more flexibility than James + Thomas.

For the sake of argument -


Situation 1:

Jazz are at 73 million after signing their rookie.

4 million over the LT - they have to pay 4 million in penalties so they are now paying 78million


They trade Boozer for TT, James. They are now at 72 million - they pay out 75 million with tax, but then subtract 5.4 million that they are reimbursed by JJ's insurance so they actually pay out 69.6. Then they sign Millsap to a contract that starts at 7 million. So add 14 million for contract and tax and their payroll total is 83.6 million



Situation 2:

Jazz are at 73 million after signing their rookie.

4 million over the LT - they have to pay 4 million in penalties so they are now paying 78million

They trade Boozer for 5million TPE. Total payroll is now at 68 million. Add in Millsap at 7million starting and they now have 75 million on the books. Add in 6 million for LT penalties and they are up to 81 million.





So after working through this the best I know how - trading Boozer for 5 million of nothing saves them 2.6million more than trading Boozer for Tyrus and James. Not as much as I thought - but nothing to sneeze at, especially since there are few teams with enough cap space to absorb 5 million in salary.

[Three34]

Jazz have already signed Maynor, by the way.

[jax98]

So after working through this the best I know how - trading Boozer for 5 million of nothing saves them 2.6million more than trading Boozer for Tyrus and James. Not as much as I thought - but nothing to sneeze at, especially since there are few teams with enough cap space to absorb 5 million in salary.

$2.6 million saved is $5.2 million saved from a luxury tax perspective and would definitely be preferable instead of taking on salary - even if that salary is Tyrus Thomas.

Of course, if they cannot find a team to give them $5 million in relief, then Thomas/James doesn't look that bad.

But this is where we turn back to Sham's comment:

We should probably go ahead and stop with the idea that Jerome James is an instant financial saving. He won't be. The Knicks wanted him to be, banking on the theory that Jerome wouldn't be arsed to work hard to recover since he never works hard at anything. But they forgot one thing - Jerome tends to work hard once the money's run out. And he's in the final year of his contract. So this year is not the year he'll be slacking.

Which kind of ruins both our plans.

[BR0D1E86]

Is it just me? I think the cap going down makes it more likely that top FA’s switch teams. You’re entitled to a % of the salary cap. Generally a max player signing a 5 year deal vs a 6 is almost a wash assuming you get another max deal after the 5 years are up.

With the cap going down, wouldn’t more of these guys be open to signing shorter deals waiting for the cap to go back up before they cash in again?

Maybe it’s just me. I could be talking out of my arse. I do that frequently.

[Three34]

They can sign three year extensions now, starting at 105% of the last year of their current salaries, and do exactly that while being paid a lot more.

[Magilla_Gorilla]

So after working through this the best I know how - trading Boozer for 5 million of nothing saves them 2.6million more than trading Boozer for Tyrus and James. Not as much as I thought - but nothing to sneeze at, especially since there are few teams with enough cap space to absorb 5 million in salary.

$2.6 million saved is $5.2 million saved from a luxury tax perspective and would definitely be preferable instead of taking on salary - even if that salary is Tyrus Thomas.

No it isn't - thats with luxury tax paid. 2.6 million is 2.6 million.


GO check above - all of my final numbers include money actually paid out, including the luxury tax.

[dice]

so are the big boys in 2010 likely to sign 3 yr. extensions now? are max contracts now much less lucrative next summer?