Implications of the New Salary and Luxury Tax Lines

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Published: July 8, 2010

A journal article was requested, so I am happy to oblidge. Today the NBA released both the salary cap and the luxury tax numbers and they were higher than anticipated. This is how it relates to our favorite team:

The Hornets have 9 players under contract at around 66.3 million. Figuring that they sign their two rookies, that will put them at around 68.6 million dollars in payroll. The lux tax line will be 70.3 million next year, and in order to both avoid paying a luxury tax payment AND collect the rebate check (usually between 3-5 million), the Hornets will have to be under that number by the end of the season.

Assuming the Hornets bring back Gray or Ike, that would give them 12 players under contract and they would be just a couple hundred grand under the tax line. Seeing that they will likely have 13-14 guys in case of injury, they will most likely have to go over the line, but like I said- they have all season to get back under.

As far as how they can acquire players (outside of standard trades)- they can use one of their many trade exemptions- ranging from 1 million to 6.6 million- to basically just pluck a player off a team. If LBJ says he wants to go to Miami and they need room, we can just trade an exemption to Miami for Michael Beasley (just an example, not a rumor). That goes for any player with a salary under 6.6 mil this season that a team might want to dump.

The Hornets also have their MLE and their bi-annual exemtions and can hand out a contract out as large as 5 years/34 million or they can split that up between multiple players. Then, to get back under the tax line they can just dump guys like Songalia and JuJu around the trade deadline like they did last season. Combined, Darius and Julian make a little over 7.6 million dollars next season- meaning that if we are convinced we can dump them (along with cash and maybe a 2nd round pick) at the trade deadline, then we could spend nearly 8 million dollars on players this offseason and still avoid the luxury tax. A one year rental like Nazr Mohammad comes to mind or perhaps a two guard like Ronnie Brewer or Pietrus.

With all the A and B free agents gone (except David Lee and maybe Haywood), the MLE should be enough to get practically anybody out there. In addition, plenty of teams would be happy to trade certain players for one of our exemptions. Essentially, look at the 200 available free agents along with about 50-70 players currently on teams’ rosters, and that is what New Orleans has to choose from. The Hornets have plenty of options and should be able to get back under the tax line no matter what they do. Remember, Okafor wasn’t acquired until late July last year and Ike and Songalia were well after that. The Hornets will explore tons of options and fill out the roster the best way they see fit.

My personal “wish list”? I trade our Rasual Butler exemption to Indy for Dhantay Jones and then I go sign Ian Mahinmi for 4 years/12 million, I re-sign Gray, and I sign Carlos Arroyo to a minimum deal (just in case I move Collison).

CP3/Collison/Arroyo

D. Jones/Thornton

Peja/Posey/Pondexter

West/Brackins

Okafor/Mahinmi/Gray

(Dump Songalia and JuJu)- Salary at around 69.5. Under the lux tax and I will be  flexible going into 2011-2012, or I can move Peja at the trade deadline for an Iggy type and just go for it with this roster plus some minor tweeks for the next 5 years.

 

Now you play GM- With our MLE, trade exemptions, expiring contracts, and valuable trade assets like DC and maybe West- What would YOU do?

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