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Thunder won't have an easy time keeping this core together

Now it's time for Sam Presti to corral James Harden and Serge Ibaka, but getting them signed will not be easy. Even if the two sign for slightly less than market value, the team could run into significant luxury tax problems eventually.
by Berry Tramel Published: July 2, 2012

Even if Perk is gone by then, traded or amnestied for contract relief, which the new labor agreement allows one time per franchise, that's $20 million for the rest of the team. And if you don't have Perkins, you better have another big guy in the middle, because young Americans aren't shrinking and aren't fleeing gymnasiums.

What good is it to keep Durant, Westbrook, Harden and Ibaka if you can't put a roster around them?

“We gotta be able to build a team that can win year in and year out,” Presti said. “And those are the challenges that have to be balanced.”

So just pay the luxury tax, some say. Clay Bennett and Aubrey McClendon are rich. The Thunder is making money. Playoff runs fill the coffers.

Except the new luxury tax is a killer. The old luxury tax had a straight 1:1 ratio. Go $5 million over the payroll cap, pay a $5 million tax to the league, to be shared by non-violators.

The new luxury tax escalates, starting with the 2013-14 season, which is when the new contracts for Ibaka and Harden would kick in. Up to $5 million over the cap, the tax rate is $1.50. From $5 million to $10 million, the rate is $1.75. From $10 million to $15 million, $2.50. From $15 million to $20 million, $3.75. From $20 to $25 million, $4.25.

So, a franchise that goes $12 million over the cap would pay a tax of $21.25 million — $7.5 million for the first $5 million, $8.75 million for the second $5 million and $5 million for the last $2 million.

I know it's confusing, but you've got to understand this to know why signing Harden and Ibaka will be so difficult.

And it gets even worse. A franchise that is over the cap for three straight years pays a different rate in Year 3 — $2.5 million for every dollar over up to $5 million, $2.75 for every dollar for the next $5 million, $3.50 for every dollar between $10 million and $15 million, $4.25 for every dollar between $15 million and $20 million, and $4.75 for every dollar between $20 million and $25 million.

Let's say the Thunder signs Harden and Ibaka, keeps a good roster together and goes a little over the cap. In summer 2016, if the Thunder has been over the cap for three years, and is $13 million over for 2015-16, the Thunder would be taxed $36.75 million.

Did you catch that? Not only would the Thunder be spending big on salaries, it would have to write a check to the NBA for $36.75 million.

From where does that money come?

And here's the sobering part. Busting the cap by $13 million probably isn't enough. ESPN's Tom Penn, an expert on NBA economics, said most league champions in recent years have been around $20 million over the cap.

Maybe that will change when Mark Cuban and the Buss family and Micky Arison study that escalating tax.

But whatever the case, this is a sobering summer for the Thunder.

Harden seems unconcerned. “It'll do a pretty good job of working itself out,” he said. “This is something special.”

Special? Yes? Work itself out? No. These are cold and hard business decisions.

Keeping Harden and Ibaka isn't just a case of Bennett opening his wallet. The franchise's financial foundation is at stake.

“That's part of our process internally, understand the effect of that, not only on the team, but on the franchise,” Presti said of the luxury tax.

“I can say, if there's a piece of compensation that's not going to a specific person or player, that doesn't necessarily mean that's going into Mr. Bennett's pocket. It's just going towards another player that ultimately can help us win.”

That's groundwork for the possibility of Harden or Ibaka leaving.

Maybe Ibaka and Harden will take less money. Maybe the payroll cap will rise. Maybe we have another energy boom and the Thunder owners give Presti a blank check to make sure Oklahoma City becomes Titletown.

But I wouldn't bet on any of it. It will be very difficult for the Thunder to keep both Harden and Ibaka.

Berry Tramel: Berry can be reached at (405) 760-8080 or at btramel@opubco.com. He can be heard Monday through Friday from 4:40-5:20 p.m. on The Sports Animal radio network, including FM-98.1. You can also view his personality page at newsok.com/berrytramel.

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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