Luxury Tax Implications

Moderators: DelaneyRudd, FJS, Inigo Montoya

SoCalJazzFan
Analyst
Posts: 3,667
And1: 755
Joined: Jul 29, 2009

Luxury Tax Implications 

Post#1 » by SoCalJazzFan » Wed Jul 21, 2021 8:25 pm

Not sure if this fit better in the Mike Conley contract or Free Agent threads, so I made it its own. It is my calculations of the tax implications of various moves. I believe that the Jazz were a luxury tax team last year (team salary $133.3M vs $132.6M tax threshhold) so, next year they will probably be in repeater status (luxury tax at $136.6M next season), which is what I base the following numbers on. If this is wrong, the tax numbers would go down, but still be significant.

Scenario 1: The Jazz sign Conley for $25M and then round out the roster with two other players at $2M each (keeping everyone else).
Team salary= $163.1M resulting in a tax of $96.8M and a total cost of $259.9M!!

This frames the first question- even though the Jazz have indicated that they really want to re-sign Conley, are they willing to do it for a cost of nearly $120M for this next season alone?

Scenario 2: Scenario 1 plus trading Favors into another teams cap space (e.g. Favors + #30 + cash to OKC for #34 and/or #36 picks).
Team salary= $153.4M, tax of $51.4M, total cost $204.8M

So, in scenario 1, keeping Favors costs the Jazz $55.1M. Given this cost and his inability to be a small ball/stretch center probably means he is traded one way or another.

Scenario 3: Scenario 1 plus trading Bogey for Kuzma and McKennie (could be other(s) that make the team salary cheaper).
Team salary= $159.3M, $77.8M tax, total cost $237.1M

Is keeping Bogey over Kuzma and McKennie (or whomever else) worth nearly $23M to Ryan Smith?

Scenario 4: Scenarios 2 and 3 together (Bogey and Favors traded, but sign MC for $25M).
Team salary= $149.8M, $37.5M tax, $187.3M total.
Trading Bogey and Favors saves the team nearly $73M in tax payments.

Scenario 4B: If in addition to trading Favors and Bogey they can sign Conley for $20M instead of $25M:
Team Salary= $145.8M, $24.0M tax, $169.9M total.
The $5M in salary savings results in $13.5M total savings. Also, Scenario 4B is $90M cheaper than Scenario 1.

Just some numbers to give perspective on how the Jazz might make moves this offseason.
SoCalJazzFan
Analyst
Posts: 3,667
And1: 755
Joined: Jul 29, 2009

Re: Luxury Tax Implications 

Post#2 » by SoCalJazzFan » Wed Jul 21, 2021 9:49 pm

If I am not mistaken, to realistically sign and trade Conley, I believe that the Jazz have to be below $143M team salary (tax apron), so Scenario 4B plus another move to dump salary (drop a NG contract or two or another trade with less incoming salary) would need to happen.
red4hf
Jazz Forum GTS Champion 2019-2020
Posts: 9,456
And1: 609
Joined: Jul 04, 2002

Re: Luxury Tax Implications 

Post#3 » by red4hf » Wed Jul 21, 2021 10:24 pm

That repeater tax, just wow........
KuruptedCav
Starter
Posts: 2,254
And1: 781
Joined: Dec 15, 2004

Re: Luxury Tax Implications 

Post#4 » by KuruptedCav » Wed Jul 21, 2021 10:58 pm

The Jazz aren’t in the repeater tax next year. Still a high tax bill, but, 2018/19 and 2019/20 were under, so they have a few years…


Sent from my iPhone using RealGM mobile app
red4hf
Jazz Forum GTS Champion 2019-2020
Posts: 9,456
And1: 609
Joined: Jul 04, 2002

Re: Luxury Tax Implications 

Post#5 » by red4hf » Wed Jul 21, 2021 11:09 pm

KuruptedCav wrote:The Jazz aren’t in the repeater tax next year. Still a high tax bill, but, 2018/19 and 2019/20 were under, so they have a few years…


Sent from my iPhone using RealGM mobile app


You sir are correct...... My mistake.......
SoCalJazzFan
Analyst
Posts: 3,667
And1: 755
Joined: Jul 29, 2009

Re: Luxury Tax Implications 

Post#6 » by SoCalJazzFan » Wed Jul 21, 2021 11:54 pm

KuruptedCav wrote:The Jazz aren’t in the repeater tax next year. Still a high tax bill, but, 2018/19 and 2019/20 were under, so they have a few years…


Sent from my iPhone using RealGM mobile app

You're right. Here are the updated numbers:

Scenario 1 (sign MC to $25M, keep everyone else)= $163.1M team salary, $70.1M tax, $233.2M total

Scenario 2 (trade Favors into space)= $153.4 M team salary, $33.6M tax, total $186.7M

Scenario 3 (trade Bogey or another player for team salary savings of nearly $4M)= $159.3M team salary, $55.1M tax, $214.4M total

Scenario 4 (scenarios 2 and 3 combined)= $149.6 team salary, $23.8M tax, $173.4M total.

Scenario 4B (scenario 4 with MC @ $20M)= $145.6 team salary, $14.5M tax, $160M total

I'll add Scenario 5 (trade Favors into cap space and resign MC @ $20M)= $148.4M team salary, $20.8M tax, $169.2M total.

Bottom line:
Trading Favors into another team's cap space is highly likely.
It will be interesting to see if MC is resigned and for how much and how long. A 3 yr deal puts the Jazz squarely into the repeater tax in the future.
A Bogey/Ingles/Clarkson trade could be as much about finances as basketball.
KuruptedCav
Starter
Posts: 2,254
And1: 781
Joined: Dec 15, 2004

Re: Luxury Tax Implications 

Post#7 » by KuruptedCav » Thu Jul 22, 2021 5:43 pm

SoCalJazzFan wrote:
KuruptedCav wrote:The Jazz aren’t in the repeater tax next year. Still a high tax bill, but, 2018/19 and 2019/20 were under, so they have a few years…


Sent from my iPhone using RealGM mobile app

You're right. Here are the updated numbers:

Scenario 1 (sign MC to $25M, keep everyone else)= $163.1M team salary, $70.1M tax, $233.2M total

Scenario 2 (trade Favors into space)= $153.4 M team salary, $33.6M tax, total $186.7M

Scenario 3 (trade Bogey or another player for team salary savings of nearly $4M)= $159.3M team salary, $55.1M tax, $214.4M total

Scenario 4 (scenarios 2 and 3 combined)= $149.6 team salary, $23.8M tax, $173.4M total.

Scenario 4B (scenario 4 with MC @ $20M)= $145.6 team salary, $14.5M tax, $160M total

I'll add Scenario 5 (trade Favors into cap space and resign MC @ $20M)= $148.4M team salary, $20.8M tax, $169.2M total.

Bottom line:
Trading Favors into another team's cap space is highly likely.
It will be interesting to see if MC is resigned and for how much and how long. A 3 yr deal puts the Jazz squarely into the repeater tax in the future.
A Bogey/Ingles/Clarkson trade could be as much about finances as basketball.

Makes sense, and Favors, while a fav player of mine, offers the least when the playoffs roll around of the group.

I think Ingles stays for matchup reasons, Clarkston is infinitely valuable as instant offense, but might be the easier plug to replace.

Part of me really wants ownership to run it back for a year.


Sent from my iPhone using RealGM mobile app
red4hf
Jazz Forum GTS Champion 2019-2020
Posts: 9,456
And1: 609
Joined: Jul 04, 2002

Re: Luxury Tax Implications 

Post#8 » by red4hf » Thu Jul 22, 2021 6:02 pm

Resigning Conley at around $20 mil and just dealing Favors still costs the Jazz a hell of a lot...... So, I'm thinking at least both of them are gone.......
User avatar
babyjax13
RealGM
Posts: 22,246
And1: 8,509
Joined: Jul 02, 2006
Location: Tuscaloosa Alabama
Contact:
     

Re: Luxury Tax Implications 

Post#9 » by babyjax13 » Fri Jul 23, 2021 6:01 am

To think that stupid Matt Thomas trade may have derailed retaining Conley at all. I think this past season was such a terrible one by DL.

1. Draft Doke, then sign Favors --- why draft Dok in the first place when backup centers can be found for the minimum (Udoh was GREAT!)...and I love Favors, don't mind at all overpaying him a bit to come back, but we probably paid double his market value?

2. Make a trade at the deadline to try and upgrade the fringes of the rotation to help us as a title contender. Probably got told by Smith "if it makes us a championship level team, do it" and the judgement that was made is that going 800k over the tax for Matt Thomas was going to be worth it.

If you don't do #1 or #2 we don't have the repeater tax problems down the road.
Image

JazzMatt13 wrote:just because I think aliens probably have to do with JFK, doesn't mean my theory that Jazz will never get Wiggins, isn't true.

JColl
User avatar
babyjax13
RealGM
Posts: 22,246
And1: 8,509
Joined: Jul 02, 2006
Location: Tuscaloosa Alabama
Contact:
     

Re: Luxury Tax Implications 

Post#10 » by babyjax13 » Fri Jul 23, 2021 6:02 am

It's the third year in a row repeater tax starts?
Image

JazzMatt13 wrote:just because I think aliens probably have to do with JFK, doesn't mean my theory that Jazz will never get Wiggins, isn't true.

JColl
Gert42
Junior
Posts: 343
And1: 104
Joined: Jun 05, 2016
       

Re: Luxury Tax Implications 

Post#11 » by Gert42 » Fri Jul 23, 2021 12:27 pm

babyjax13 wrote:To think that stupid Matt Thomas trade may have derailed retaining Conley at all. I think this past season was such a terrible one by DL.

1. Draft Doke, then sign Favors --- why draft Dok in the first place when backup centers can be found for the minimum (Udoh was GREAT!)...and I love Favors, don't mind at all overpaying him a bit to come back, but we probably paid double his market value?

2. Make a trade at the deadline to try and upgrade the fringes of the rotation to help us as a title contender. Probably got told by Smith "if it makes us a championship level team, do it" and the judgement that was made is that going 800k over the tax for Matt Thomas was going to be worth it.

If you don't do #1 or #2 we don't have the repeater tax problems down the road.


I rarely criticize picks because as much as I love the draft, I truly don't know prospects as well as teams. Even with FA being after the draft and Rudy not signing his extension yet, I still think Dok was such a wrong pick for where this team was rotation wise and franchise contention wise.

And what you said about backup bigs being found on the bargain racks is 100% true.
SoCalJazzFan
Analyst
Posts: 3,667
And1: 755
Joined: Jul 29, 2009

Re: Luxury Tax Implications 

Post#12 » by SoCalJazzFan » Fri Jul 23, 2021 8:00 pm

babyjax13 wrote:It's the third year in a row repeater tax starts?

Three of the last four years.

Return to Utah Jazz