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Berry Tramel

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Oklahoma City Thunder: Is paying the luxury tax essential?

by Berry Tramel Modified: November 5, 2013 at 12:40 pm •  Published: November 5, 2013

I’m fired up. My pal Jon Hamm is in a writing mood. Jon is the NBA collective bargaining expert — he is a contributor to Larry Coon’s website that focuses on NBA labor issues.

Hamm has an open invitation to write for this blog anytime, and he got some inspiration over the weekend. So here you go:

“Berry, I got in a mood to hammer out some thoughts yesterday and today. Thought I’d share with you.

“ESPN’s Bill Simmons is prone to pick funny over fact when making his talking points. Simmons does solid work when analyzing in hindsight but, like many folks, is not so good at analyzing the now and the future. I try not to get too fired up when talking heads talk. Most of the guys are in character and are making absurd statements for the sake of getting a reaction. I’ve never felt Simmons fell in that category. Often wrong, certainly, but not fake. But then he made these statements on Friday:

“‘We have never seen a team not pay the tax and win the title. You have to do it. Those are how you get the extra two good guys on your team and what they did with that Harden trade, I think it was the worst trade in this century in basketball because they gave away somebody who was the best 2-guard in the league for a couple spare parts. And not just that, but now if I’m Durant and Westbrook, why am I going to stay here? I have all these other teams who will do anything they can to pay $90 or $100 million dollars. Look at what the Nets are doing. If you’re Durant, you’re going to stay here in this mom and pop organization? I don’t see it. I think he’s going to leave in three years. I do.’

“This is probably not the worst thing that Simmons has said about the Thunder since the team moved from Seattle, though the ‘mom and pop organization’ comment ranks up towards the top. The Thunder has a total of $234 million of committed future salary, fourth most in the league, yet they just can’t shake the ‘cheap’ label. A less interested observer might get tricked into thinking the Thunder was being run like the 1990s Clippers.

“(On a side note, and potentially an unpopular one: if history is any indication, the odds are against Durant and Westbrook spending their entire careers with the Thunder. Players tend to move around, including the superstars. But to make such definitive statements about them leaving in three or four years is silly.)
 
“While Simmons was actually just taking the opportunity to shriek yet again about the James Harden trade, a topic that’s about as fresh as prohibition, he just might have made a point. I’ve kept a spreadsheet of tax payers using data originally provided to me by Larry Coon and supplemented with data from Mark Deeks of shamsports.com. Sure enough, teams that win NBA titles tend to be tax payers. Only the 2005-06 Miami Heat have won a title without paying extra for the privilege, which kind of blows a hole in Simmons’ opening statement. Five other non-tax paying teams have made it to the Finals and lost (2006-07 Cavaliers, 2008-09 Magic, 2010-11 Heat, 2011-12 Thunder and the 2012-13 Spurs).
 
“But is it reasonable to think the last three teams on that list were at a disadvantage because they weren’t wild spenders? The 2011 Heat were a fine team that got a poor Finals performance from LeBron James. The 2012 Thunder just weren’t ready yet. And if the Spurs hit a free throw or two, not spend an extra dollar or two, they win the Finals last season. I don’t see how the results of those series would have been changed thanks to a few extra dollars spent.
 
“Some teams have paid tens of millions and more in luxury tax with almost nothing to show for it. The Knicks have paid over $205 million luxury tax since its inception and I can count their total number of playoff series on one hand. Portland paid huge sums of tax in the early 2000s before cutting back. Though to be fair, the Lakers have paid the third-most in luxury tax over the years and that’s worked out pretty well for them. That might have had something to do with the likes of Kobe, Shaq and Gasol, though.
 
“It makes sense why title winners wind up paying the luxury tax. It’s awfully hard to get to the Finals without a superstar or two and those kinds of players are pricey. A team also needs quality depth to get through an 82-game regular season and potentially 28 playoff games. Injuries and ineffectiveness strike every team at some point. Some contending teams find a rookie-scale gem or get a bargain on a player making the veteran minimum, which helps the financial cause. But typically, quality rebounders, defenders and shooters come at a premium.
 
“So Simmons has at least a half-point in regards to tax paying teams, but it strikes me more as a coincidence than fact. However, all of the above is based on the previous tax structure. The NBA’s new tax structure kicks in this season, which Larry Coon explains best here.  This more punitive luxury tax is a game-changer when it comes to building a team. It’s not only the extra dollars and cents that teams are concerned about. Tax payers also face restrictions on certain kinds of trades and have weaker salary cap exceptions to use when signing free agents.
 
“Since the 2011 lockout ended, many teams, not just Oklahoma City, have had their eyes on this new stiffer tax. Last season the Grizzlies made moves to dive under the tax line (with few outcries about how cheap ownership was, interestingly enough). Pacers VP Larry Bird has said his team ‘will not go into the tax for any reason.’ Mark Cuban has spent big year after year, winning one title and losing another while paying over $150 million in tax, and even he controversially hit the spending brakes after the 2011 lockout. The number of tax paying teams has fallen every year since the lockout ended. As Royce Young pointed out in a recent CBS Sports article, at this point only six teams are currently over the luxury tax line: the Lakers, Clippers (who could easily get under the tax line), Knicks, Nets, Bulls and Heat. Coincidentally, those teams (minus the Knicks) are considered among the favorites to win the title this season. And it just so happens that Oklahoma City has the flexibility to join that group if the right deal presents itself between now and the trade deadline.
 
“It will be interesting to see what the trend is moving forward. But to limit title contention solely to those willing to pay luxury tax seems a bit short-sighted to me.”
by Berry Tramel
Columnist
Berry Tramel, a lifelong Oklahoman, sports fan and newspaper reader, joined The Oklahoman in 1991 and has served as beat writer, assistant sports editor, sports editor and columnist. Tramel grew up reading four daily newspapers — The Oklahoman,...
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