spectre
11-04-2009, 10:32 AM
Why The Bobcats Won't Be a Tax Team Anytime Soon (http://www.shamsports.com/content/pages/)
And now, this year. There follows a projection of all team's projected luxury tax payments for the upcoming season.
2009/10 Season:
- L.A. Lakers (http://www.shamsports.com/content/pages/teams/lakers.jsp) = $21,421,066
- Dallas Mavericks (http://www.shamsports.com/content/pages/teams/mavericks.jsp) = $17,891,715
- Boston Celtics (http://www.shamsports.com/content/pages/teams/celtics.jsp) = $14,582,720
- New York Knicks (http://www.shamsports.com/content/pages/teams/knicks.jsp) = $13,510,463
- Cleveland Cavaliers (http://www.shamsports.com/content/pages/teams/cavaliers.jsp) = $12,740,694
- Utah Jazz (http://www.shamsports.com/content/pages/teams/jazz.jsp) = $12,628,526
- Orlando Magic (http://www.shamsports.com/content/pages/teams/magic.jsp) = $11,068,795
- San Antonio Spurs (http://www.shamsports.com/content/pages/teams/spurs.jsp) = $10,160,736
- Washington Wizards (http://www.shamsports.com/content/pages/teams/wizards.jsp) = $8,731,745
- Phoenix Suns (http://www.shamsports.com/content/pages/teams/suns.jsp) = $5,622,091
- Denver Nuggets (http://www.shamsports.com/content/pages/teams/nuggets.jsp) = $5,383,687
- Miami Heat (http://www.shamsports.com/content/pages/teams/heat.jsp) = $3,937,105
- Houston Rockets (http://www.shamsports.com/content/pages/teams/rockets.jsp) = $3,354,694
- New Orleans Hornets (http://www.shamsports.com/content/pages/teams/hornets.jsp) = $3,331,809
Total: $144,365,846
(Note: for the most part, calculating a team's tax figure is essentially just looking at their team salary figure (http://www.shamsports.com/content/pages/teams/salaries/index.jsp), and comparing it to the tax threshold. But there are a few subtle differences, the details of which can be found here (http://members.cox.net/lmcoon/salarycap.htm#Q16). The most relevant one is the one that says "For players who signed as free agents (i.e. not draft picks), and make less than the two-year minimum salary, the minimum salary for a two-year veteran is used in place of their actual salary," a stipulation that affect Marcus Landry (http://www.shamsports.com/content/pages/playerProfiles/profileDisplay.jsp?id=1216), Coby Karl (http://www.shamsports.com/content/pages/playerProfiles/profileDisplay.jsp?id=919), and others on this list. Also, the suspensions for Rashard Lewis (http://www.shamsports.com/content/pages/playerProfiles/profileDisplay.jsp?id=371) and Jamaal Magloire (http://www.shamsports.com/content/pages/playerProfiles/profileDisplay.jsp?id=263) have to be accounted for; teams are billed for only 50% of the money players lose when suspended by the league. God bless that Mr Coon.)
The most obvious thing that will stand out there is the sheer number of teams paying it. It's an unprecedented amount of them, and the tough economic climate is the reason why. League revenues were supposed to go up, taking the cap and tax thresholds with them, and teams had budgeted accordingly in previous years. But then the credit crunch hit, revenues went down, and so did the cap. As a result, a lot of teams that weren't expecting to be taxpayers now are. And that's why that list is so long.
Of course, this list is still subject to change. For tax calculations, a team's salary figure from the last day of the regular season is used, and there will be a lot of changes before then. Some players will be traded, others signed, several more cut, and some players will have this year's salary number retroactively altered if they meet (or miss) their performance bonuses. Since all this is in the future and hasn't yet happened, an accurate figure is incredibly hard to predict, and therefore an accurate assessment cannot be made until the season's end.
But as things stand, that's where we are. It's still pretty impressive.
Were the above numbers to be a static exhibit, the amount of tax that would be paid is the staggering $144,365,846, and it won't go down a huge amount. There's many a month left until the trade deadline, and even though there aren't a huge number of cost-cutting options available for over-the-tax teams out there, the few that there are will almost certainly be utilised. Nevertheless, any inroads that can be made into that figure will be comparatively small. There just simply aren't the means to cut much salary right now.
The teams below the tax stand to gain a tidy rebate this year. Teams that do not pay the tax are eligible for a payment of 1/30th of all the money collected as tax, whereas the teams that pay it get none. The rest of the money collected is reserved by the league for "league purposes"; that could mean many things, but a lot of it goes to the league's revenue assistance plan.
In the 2008/09 season, $87,352,665 was paid in luxury tax (see the breakdown above). 23 teams did not pay it, and 7 teams did. Each non-taxpaying team was therefore eligible for a rebate of $2,911,756 - one thirtieth of the overall tax kitty - and the league kept the remaining undistributed $20,382,277 - seven thirtieths of the overall tax kitty, i.e. the shares of the taxpaying teams that won't get it - for themselves.
This year, as you can see from all the tax that's projected to be paid, that rebate's going to be a lot higher. If the $144,365,846 figure above is all paid as tax, that will mean each non-taxpaying team is eligible for a significant rebate of $4,812,195. And no matter how rich you are, $5 million is quite a lot of money. That rebate, plus the rebate teams get from the escrow system, can go some ways to offsetting a team's salary commitment.
For example, last year, the New Orleans Hornets (http://www.shamsports.com/content/pages/teams/hornets.jsp) had a payroll of $66,858,141; to offset that, they gained a $2,911,756 luxury tax rebate, as well as a $6,467,847 escrow rebate (the players got none of their escrow back due to league wide salaries being so far in excess of the designated BRI percentage for them, so it was returned to the owners). That combined $9,379,603 made for a tidy 14% refund on their player salary expenses, and lessened their overall salary commitment to $57,478,528.
In contrast, the Dallas Mavericks (http://www.shamsports.com/content/pages/teams/mavericks.jsp) had a player payroll of $94,646,833 last year. That meant a luxury tax payment of $23,611,661 (when things such as Dirk Nowitzki's (http://www.shamsports.com/content/pages/playerProfiles/profileDisplay.jsp?id=81) one game suspension and Devean George's (http://www.shamsports.com/content/pages/playerProfiles/profileDisplay.jsp?id=177) retroactive bonus were included), boosting their overall salary commitment to $118,258,494. As a taxpayer, they didn't get a luxury tax rebate, and the escrow rebate brought their overall payroll commitment down to only $111,790,647, roughly double what the Hornets paid.
Such is the advantage of not being a taxpayer.
So, if you want to team to cross over into tax territory in order to make your desired transaction, ask yourself if it's worth both the extra tax payments and the loss of that rebate to the owners. Because it probably isn't.
And now, this year. There follows a projection of all team's projected luxury tax payments for the upcoming season.
2009/10 Season:
- L.A. Lakers (http://www.shamsports.com/content/pages/teams/lakers.jsp) = $21,421,066
- Dallas Mavericks (http://www.shamsports.com/content/pages/teams/mavericks.jsp) = $17,891,715
- Boston Celtics (http://www.shamsports.com/content/pages/teams/celtics.jsp) = $14,582,720
- New York Knicks (http://www.shamsports.com/content/pages/teams/knicks.jsp) = $13,510,463
- Cleveland Cavaliers (http://www.shamsports.com/content/pages/teams/cavaliers.jsp) = $12,740,694
- Utah Jazz (http://www.shamsports.com/content/pages/teams/jazz.jsp) = $12,628,526
- Orlando Magic (http://www.shamsports.com/content/pages/teams/magic.jsp) = $11,068,795
- San Antonio Spurs (http://www.shamsports.com/content/pages/teams/spurs.jsp) = $10,160,736
- Washington Wizards (http://www.shamsports.com/content/pages/teams/wizards.jsp) = $8,731,745
- Phoenix Suns (http://www.shamsports.com/content/pages/teams/suns.jsp) = $5,622,091
- Denver Nuggets (http://www.shamsports.com/content/pages/teams/nuggets.jsp) = $5,383,687
- Miami Heat (http://www.shamsports.com/content/pages/teams/heat.jsp) = $3,937,105
- Houston Rockets (http://www.shamsports.com/content/pages/teams/rockets.jsp) = $3,354,694
- New Orleans Hornets (http://www.shamsports.com/content/pages/teams/hornets.jsp) = $3,331,809
Total: $144,365,846
(Note: for the most part, calculating a team's tax figure is essentially just looking at their team salary figure (http://www.shamsports.com/content/pages/teams/salaries/index.jsp), and comparing it to the tax threshold. But there are a few subtle differences, the details of which can be found here (http://members.cox.net/lmcoon/salarycap.htm#Q16). The most relevant one is the one that says "For players who signed as free agents (i.e. not draft picks), and make less than the two-year minimum salary, the minimum salary for a two-year veteran is used in place of their actual salary," a stipulation that affect Marcus Landry (http://www.shamsports.com/content/pages/playerProfiles/profileDisplay.jsp?id=1216), Coby Karl (http://www.shamsports.com/content/pages/playerProfiles/profileDisplay.jsp?id=919), and others on this list. Also, the suspensions for Rashard Lewis (http://www.shamsports.com/content/pages/playerProfiles/profileDisplay.jsp?id=371) and Jamaal Magloire (http://www.shamsports.com/content/pages/playerProfiles/profileDisplay.jsp?id=263) have to be accounted for; teams are billed for only 50% of the money players lose when suspended by the league. God bless that Mr Coon.)
The most obvious thing that will stand out there is the sheer number of teams paying it. It's an unprecedented amount of them, and the tough economic climate is the reason why. League revenues were supposed to go up, taking the cap and tax thresholds with them, and teams had budgeted accordingly in previous years. But then the credit crunch hit, revenues went down, and so did the cap. As a result, a lot of teams that weren't expecting to be taxpayers now are. And that's why that list is so long.
Of course, this list is still subject to change. For tax calculations, a team's salary figure from the last day of the regular season is used, and there will be a lot of changes before then. Some players will be traded, others signed, several more cut, and some players will have this year's salary number retroactively altered if they meet (or miss) their performance bonuses. Since all this is in the future and hasn't yet happened, an accurate figure is incredibly hard to predict, and therefore an accurate assessment cannot be made until the season's end.
But as things stand, that's where we are. It's still pretty impressive.
Were the above numbers to be a static exhibit, the amount of tax that would be paid is the staggering $144,365,846, and it won't go down a huge amount. There's many a month left until the trade deadline, and even though there aren't a huge number of cost-cutting options available for over-the-tax teams out there, the few that there are will almost certainly be utilised. Nevertheless, any inroads that can be made into that figure will be comparatively small. There just simply aren't the means to cut much salary right now.
The teams below the tax stand to gain a tidy rebate this year. Teams that do not pay the tax are eligible for a payment of 1/30th of all the money collected as tax, whereas the teams that pay it get none. The rest of the money collected is reserved by the league for "league purposes"; that could mean many things, but a lot of it goes to the league's revenue assistance plan.
In the 2008/09 season, $87,352,665 was paid in luxury tax (see the breakdown above). 23 teams did not pay it, and 7 teams did. Each non-taxpaying team was therefore eligible for a rebate of $2,911,756 - one thirtieth of the overall tax kitty - and the league kept the remaining undistributed $20,382,277 - seven thirtieths of the overall tax kitty, i.e. the shares of the taxpaying teams that won't get it - for themselves.
This year, as you can see from all the tax that's projected to be paid, that rebate's going to be a lot higher. If the $144,365,846 figure above is all paid as tax, that will mean each non-taxpaying team is eligible for a significant rebate of $4,812,195. And no matter how rich you are, $5 million is quite a lot of money. That rebate, plus the rebate teams get from the escrow system, can go some ways to offsetting a team's salary commitment.
For example, last year, the New Orleans Hornets (http://www.shamsports.com/content/pages/teams/hornets.jsp) had a payroll of $66,858,141; to offset that, they gained a $2,911,756 luxury tax rebate, as well as a $6,467,847 escrow rebate (the players got none of their escrow back due to league wide salaries being so far in excess of the designated BRI percentage for them, so it was returned to the owners). That combined $9,379,603 made for a tidy 14% refund on their player salary expenses, and lessened their overall salary commitment to $57,478,528.
In contrast, the Dallas Mavericks (http://www.shamsports.com/content/pages/teams/mavericks.jsp) had a player payroll of $94,646,833 last year. That meant a luxury tax payment of $23,611,661 (when things such as Dirk Nowitzki's (http://www.shamsports.com/content/pages/playerProfiles/profileDisplay.jsp?id=81) one game suspension and Devean George's (http://www.shamsports.com/content/pages/playerProfiles/profileDisplay.jsp?id=177) retroactive bonus were included), boosting their overall salary commitment to $118,258,494. As a taxpayer, they didn't get a luxury tax rebate, and the escrow rebate brought their overall payroll commitment down to only $111,790,647, roughly double what the Hornets paid.
Such is the advantage of not being a taxpayer.
So, if you want to team to cross over into tax territory in order to make your desired transaction, ask yourself if it's worth both the extra tax payments and the loss of that rebate to the owners. Because it probably isn't.