Mechanics of Paying the Luxury Tax Thread

lovegtm

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With Yabu's option picked up, and Mook looking like a 6th man candidate, there's a good chance the Celtics will be paying the tax for a long time, and likely the repeater tax. If the AD dream ever happens, that will be a huge bump as well, since you'd likely be replacing a future Jaylen max, at ~$30M, with AD's max, which would be closer to $40M.

Say that you're Wyc, and you have a team whose valuation is skyrocketing, but whose cash flows lag. What are your options for actually paying the tax year-to-year? $100M+ bills are substantial for low B billionaires, given that most assets aren't generally held in cash. Are there PE-type firms that will bridge that gap? Are there analogous transactions in other industries?

It's not my money, but it's still going to matter soon for my viewing experience.
 

benhogan

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The franchise (the asset) will increase in value with more success. The top line revenue should also increase with success in the form of TV/Ad revenue, concession sales, GE sponsorship, arena naming rights, etc. So for every dollar that Wyc pays in luxury tax, some or all should be covered with an increase in revenue. Obviously, if they didn't have to pay into the luxury tax while winning championships that would be the best P/L for Wyc. But that doesn't look possible in today's NBA.

These are private LPs so getting a full disclosure on revenues/costs would be tough. But I wouldn't worry about the Celtics, not only do they market to a sizeable city (Boston) but basically control a region (New England). PLUS these are shrewd private equity guys and this isn't their first rodeo, they won't pull a McCord. They constantly update and map out the Celtics financial situation years in advance.
 

HowBoutDemSox

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Per the trade machine, they're about $4 million over the tax for this season; Morris makes about $5.375 million. He's been valuable to them in the early goings but if they're able to trade him for draft picks to a team under the cap and sneak below the tax for this season, it delays the repeater for a year and saves Wyc some serious dough. Do you damage this year's chance for a chance of keeping the band together for a longer run, especially if Hayward gets his legs back under him and can pick up more of Morris' production, and in later years perhaps Durant has departed Golden State and a title seems more attainable?
 

benhogan

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Per the trade machine, they're about $4 million over the tax for this season; Morris makes about $5.375 million. He's been valuable to them in the early goings but if they're able to trade him for draft picks to a team under the cap and sneak below the tax for this season, it delays the repeater for a year and saves Wyc some serious dough. Do you damage this year's chance for a chance of keeping the band together for a longer run, especially if Hayward gets his legs back under him and can pick up more of Morris' production, and in later years perhaps Durant has departed Golden State and a title seems more attainable?
While $20-30MM seems like a lot to you and me, that's interest on interest for the PE dudes. The Celtics have been fiscally responsible for years, no need to pull back the reigns now.

Injuries could happen to us or the Warriors, which would increase our odds of winning it all. We need everyone of our good players, especially MaMo and Rozier. Seven games in and we've lost Baynes for 3 games and Theis for more due to injuries.

We also have plenty of draft picks to fill up the bench, on the cheap, for the future. Thank you 76ers, Clippers and Grizzilies.
 

InstaFace

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getting under the tax this year lets Wyc stretch the window by paying more of the stars for longer, which to my mind = more championship equity. We're about $3M over, there's no way Danny isn't scheming to get under that. Would he go over for the right acquisition? Sure. But I bet he's thinking what step 2 is after getting rid of Jabari Bird's $1.3.
 

HomeRunBaker

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getting under the tax this year lets Wyc stretch the window by paying more of the stars for longer, which to my mind = more championship equity. We're about $3M over, there's no way Danny isn't scheming to get under that. Would he go over for the right acquisition? Sure. But I bet he's thinking what step 2 is after getting rid of Jabari Bird's $1.3.
How much easier would it have been by simply moving on from Yabu? I don't have the numbers in front of me but his contract carries extra baggage (see what I did there) than simply his raw salary number. I'm still shocked at this.
 

GreenMonster49

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How much easier would it have been by simply moving on from Yabu? I don't have the numbers in front of me but his contract carries extra baggage (see what I did there) than simply his raw salary number. I'm still shocked at this.
The luxury tax calculations are based on the cap hits as of the last day of the regular season. Yabusele could easily be traded later in the season if the Celtics brass were to decide to get under the tax threshold.
 

wade boggs chicken dinner

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How much easier would it have been by simply moving on from Yabu? I don't have the numbers in front of me but his contract carries extra baggage (see what I did there) than simply his raw salary number. I'm still shocked at this.
I posted this in the 2018-19 thread but getting rid of Yabu this year will not put them under the luxury tax and Yabu's salary next year will not have any material effect on the amount of luxury being paid next year.

CelticsBlog has a good projection of salaries here: https://www.celticsblog.com/2018/7/27/17599624/boston-celtics-luxury-tax-problem-projecting-future-payroll-kyrie-irving-gordon-hayward-al-horford

While it is true as said upthread that the Cs would be able to avoid paying the luxury tax this year by getting rid of Morris, that move would really worry me. The Cs must be manking bank on this team for the last couple of years and hopefully they can stand to pay a few years of repeater tax. I mean OKC is looking to pay something like $70+M in luxury tax this year - the Cs are a few years away from that.

edit: typos.
 
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DeJesus Built My Hotrod

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This team needs Marcus Morris.
I like Mook and agree that he adds a lot of value to the squad (while at the same time I am amused that these words were posted on this forum given how crazy Morris drives some folks in the gamethreads). That said, he is truly a luxury and while they would miss his scoring and toughness, I think the Cs could win without him. I won't be shocked if Ainge moves him before the deadline to avoid the tax hit.
 

bsj

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d on this forum given how crazy Morris drives some folks in the gamethreads). That said, he is truly a luxury and while they would miss his scoring and toughness, I think the Cs could win without h
I think the C's will be able to win without him in 2 months. If that happens, he is tradeable.
Right now, he is essential.
 

lovegtm

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The 2018 version of MaMo is a really good player. If he keeps this up at all, especially the shot selection, improved ball movement, and defense, you can't trade him. He's ideal for all of the playoff matchups: Raps, Bucks, Sixers, Dubs. You can never have enough 6-9 wings who can most positions, shoot 3s, and create shots.
 

HomeRunBaker

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This team needs Marcus Morris.
I'd argue much more than Jaylen who doesn't really have a role on this team. He's like that lost soul in high school that you wonder how it will end with him.

The 2018 version of MaMo is a really good player. If he keeps this up at all, especially the shot selection, improved ball movement, and defense, you can't trade him. He's ideal for all of the playoff matchups: Raps, Bucks, Sixers, Dubs. You can never have enough 6-9 wings who can most positions, shoot 3s, and create shots.
People forget that Morris is a quality starter in this league and is going to be paid as such in FA when he's signed to play that role. He's a luxury right now, along with Rozier, that you don't appreciate until after they are gone. If we are gunning for a championship I don't see how MaMo is moved as he's really carved out a niche on this team. Natural scorers and shot creators are often taken for granted in the shot-clock game......look back to how this team looked prior to acquiring Isaiah when everything was contested with 3 on the clock.
 

InstaFace

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Sep 27, 2016
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So here's what we're actually talking about:



Those tax rates are "per dollar of overage", so at, say, $20M over, the next $5M costs you $18.75M in tax (3.75 multiplier).

Tax thresholds:
2018-19 Actual: $123.733M
2019-20 Proj.: $132M
2020-21 Proj.: $143M
 

lovegtm

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I'd argue much more than Jaylen who doesn't really have a role on this team. He's like that lost soul in high school that you wonder how it will end with him.

People forget that Morris is a quality starter in this league and is going to be paid as such in FA when he's signed to play that role. He's a luxury right now, along with Rozier, that you don't appreciate until after they are gone. If we are gunning for a championship I don't see how MaMo is moved as he's really carved out a niche on this team. Natural scorers and shot creators are often taken for granted in the shot-clock game......look back to how this team looked prior to acquiring Isaiah when everything was contested with 3 on the clock.
The Jaylen worries are a bit overblown imo. If the playoffs started today, I'd be very concerned, but 75 games is a looonnngggg time to figure out the role. I also think he'll get more comfortable playing defense under the new rules: that's clearly causing him a lot of issues.

If Morris gets paid less than 33 year-old Trevor Ariza in FA, that's a crime. And, as you note, you don't just toss away $15M/year type players when you're a championship contender.