(Warning....Long)
I have a question regarding JR Smith’s potential deal and rumored trade relative to the Cavs tax situation, and the time frames which are crucial and essential to understand relative to the framework of a deal getting done.
I have somewhat an understanding regarding the NBA and it’s current CBA’s outline of luxury tax which requires any NBA team to pay :
- For teams between $0 and $4,999,999 over the cap, the tax rate is $1.50 for every dollar over the cap.
- The incremental maximum for this level is $7.5 million.
- For teams between $5,000,000 and $9,999,999 over the cap, the tax rate is $1.75 for every dollar over the cap.
- The incremental maximum for this level is $8.75 million.
- For teams between $10,000,000 and $14,999,999 over the cap, the tax rate is $2.50 for every dollar over the cap.
- The incremental maximum for this level is $12.5 million.
- For teams between $15,000,000 and $19,999,999 over the cap, the tax rate is $3.25 for every dollar over the cap.
- The incremental maximum for this level is $16.25 million.
- And for teams $20,000,000 over the cap or above, the tax rate is $3.75 for every dollar over the cap, and increasing $0.50 for each additional $5,000,000 over $20,000,000.
* Repeater tax offenders are charged at even a higher multiple than these.
What I don’t understand is why everything you read regarding the Cavs mulling over the pain threshold of a potential JR Smith trade comes across as so final in its final tax bill/cost due for Dan Gilbert and the Cavs to pay if such a deal does occur.
It’s no secret the cost associated with potentially taking back bad salary in a JR deal due to all the luxury tax penalties associated would come at a high cost, but if I’m not mistaken, that only would occur if the Cavs did nothing else to it’s roster or payroll until the last day of next season.
The Cavs are currently a little over 5 million over the apron, and this doesn’t include the cap holds of the most recent 3 1st round selections once they all sign.
We have read ad nauseam the Cavs must find a deal receiving enough assets and value back in return to stomach paying all these potential penalties associated with bringing back the bad salaries to match JR’s outgoing.
This end number owed would in fact be at least 3x’s the amount of the $ brought back....versus just releasing JR and saving the boat load of $ getting out of the tax apron would bring.
Which brings me to my question... every year the NBA luxury tax bill is assessed and applied on the very last day of the NBA season, usually around April 10-11.
This would mean Dan Gilbert has already received and most likely paid the Cavs 2018 bill a few months ago now already back in April 2019.
Wouldn’t any JR deal, or any scenario for that matter which causes the Cavs to go deeper in the tax only require the Cavs to owe and pay/settle this final tax bill (combining its dollar amount over the tax and penalties applied to that number over the apron ) ONLY if the Cavs roster, and in particular it’s payroll , stay the exact same for the next 9 months or until the last day of next season in April 2020?
I ask this because everything I read regarding this situation comes across as if any JR deal will cost the Cavs the guaranteed salary taken back in trade plus all the penalties once the deal is consummated...like Dan Gilbert will immediately receive the bill and owe it by the end of the month.
Once the deal is done, the Cavs are on the hook of the tax penalties associated....is the way this is presented everywhere you look.
Hypothetically let’s say the Cavs trade JR for like salary (15.8 million) and remain the same 5 million over the apron they are today, and then go over even further after signing their draft picks to let’s say 12 million over the threshold in total once all is said n done.
Won’t they have then until next April 2020 to maneuver their payroll and roster to get under that number, until the next tax bill is assessed??
With this scenario, wouldn’t they have approximately 9 months to trim 12 million off their payroll if it comes to that point today or here soon??
Between potentially moving Kevin Love, and the massive amount of expiring contracts the Cavs have on their roster next season, one would assume it should be fairly easy for the Cavs to maneuver under the apron # by next April 2020 and reduce their payroll by 12 million .
Especially if their motivation is centered on getting under the apron and reset their repeater tax penalty team status.
To me it wouldn’t make sense to make the impending tax penalties a JR deal potentially would bring TODAY if they did nothing to the roster the next 9 months a huge detriment or roadblock in making a deal, at least not as much as it would be have they not have the time they do to maneuver under where they need to be by NEXT APRIL 2020.
What am I missing here?