Oklahoma City Thunder: Analyzing the luxury tax
Derek Fisher and Ronnie Brewer have hopped aboard the Thunder Express, so now we know what this roster will look like come playoff time. But what will the Thunder roster look like come next October?
The NBA’s new luxury tax has every team a little skittish. The Thunder payroll looks to get in just under the $70 million tax threshold for this season, which is very good news. But what about next year?
According to hoopshype.com, the Thunder is on the hook for $66 million in salaries, covering 10 players:
Kevin Durant: $18.77M
Russell Westbrook $14.69M
Serge Ibaka $12.25M
Kendrick Perkins $8.47M
Thabo Sefolosha $3.9M
Nick Collison $2.58M
Jeremy Lamb $2.11M
Reggie Jackson $1.32M
Perry Jones $1.08M
Hasheem Thabeet $0.91M
That’s a solid team but missing a valuable piece: the Kevin Martin/James Harden role. A sixth man who serves as a No. 3 scorer, behind Durant and Westbrook.
So the question becomes, how will the Thunder pay Martin – or someone like him? The Thunder swallowed hard and offered Harden a four-year, $53-million contract last October. He turned them down, and maybe the Thunder should be thankful he did. How in the world could OKC afford a roster than would cost virtually $80 million in 2013-14?
I corresponded this week with Jon Hamm about such issues. I introduced you to Hamm last summer. He’s a contributor to Larry Coon’s website, which tries to decipher the NBA’s collective bargaining agreement. You can find Coon’s website here. It’s a marvelous tool. I encourage every Thunder fan to check it out, if they care about the details of the salary cap.
A quick refresher on the luxury tax. This season, teams pay $1 for every $1 they exceed the luxury tax. For 2013-14, teams pay an incremental rate of luxury tax — $1.50 per dollar for the first $5 million over, $1.75 per dollar for the second $5 million over, $2.5 million for the third $5 million over, $3.25 million for the fourth $5 million, $3.75 million for the fifth $5 million over and increasing 50 cents for each additional $5 million. Plus, there’s a repeater penalty, which adds a dollar to all of those rates and kicks in for the 2014-15 season if a team was over the threshold the previous three seasons and kicks in every season after that if a team was over the threshold three of the previous four seasons.
Hamm lives in Oklahoma and he periodically keeps me straight on the all intricacies of NBA economics. Here’s a little of Hamm’s insight:
* I told Hamm that it appears to me the Thunder has to find someone – Martin or someone like him – to play for no more than $7-8 million. That would put them into the luxury tax but would not be a terrible hit. The Thunder would have room to get back out of the tax if necessary the year or so after.
“If the Thunder does choose to dip into tax waters and need to find a player like Martin to play for $7-8M, then that player could be Martin himself,” Hamm said. “I just don’t see a team under the cap making a big push for him, though I’ve been wrong before. And teams are going to be hesitant to spend their full mid-level exception (for going above the salary cap) on anyone because of all the tax worry and the fact that using the full MLE can hard cap a team for a year. So the Thunder may be able to offer a deal starting at $6.5M or $7M and bring him back.”
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