The new NBA trade deadline monster under the bed: the repeater tax

Ron Chenoy-USA TODAY Sports

The Hook introduces you to the new villain slashing hopes and dreams at the deadline. It's the repeater tax. Hide the children.

I envy you. You thought that the lockout was a bore. You didn't pay close attention. You just snarked your way through the negotiations. I envy you. When a deal was reached, you focused on trades and free agency and the Heat's quest for vengeance, not the mechanical quirks that would change how teams do business. I envy you.

But now, one of those quirks is making itself known during the 2012-13 NBA trade season, and it's time to ignore real basketball for a second and bust out the spreadsheet and count some beans. The repeater tax has arrived, and this is not going to be pretty.

What is the repeater tax? It's a clause in the new collective bargaining agreement that raises the luxury tax rate for teams that are serial tax payers. It doesn't actually go into effect until 2014-15 as a penalty, but what teams do now affects whether they'll be on the hook then. Basically, if you exceed the tax threshold in three out of the previous four seasons, you're on the hook for the higher tax if you exceed the threshold again. The "clock" began last year. The first year of the repeater tax is in 2014-15. Only teams that have been taxpayers in 2011-12, 2012-13 and 2013-14 will pay it. In 2015-16, teams that have paid the tax in three out of four of those seasons will pay repeater tax. Then 2011-12 falls off. And so it goes.

How bad is the repeater tax? At the first level of luxury tax -- up to $5 million over the threshold -- the base tax will be $1.50 for every dollar over the line. The repeater tax is $2.50 for every dollar over the line. It matches as you rise up the ladder from there -- the repeater tax is always $1 per dollar in exceedance of the threshold more than the base rate. For $20 million over the threshold, that's a $20 million difference based on whether you're a repeater or not.

Here's an example. Let's assume the luxury tax threshold rises to $75 million by 2014-15. Let's say a team like the Lakers has a payroll of $95 million -- $20 million over the threshold. If they were not repeater, their total tax payment would be $45 million, and their total payroll would be $140 million. If they were a repeater, their total tax payment would be $65 million, and their total payroll would be $160 million.

That's why teams want to avoid the repeater tag.

Any teams under the threshold last season doesn't need to worry about the repeater tax in 2014-15. But they do need to worry about 2015-16 -- crossing the line this season, even if they were under last year, would force them to dip back under in one of the next two seasons to avoid a 15-16 repeater hit. So when you hear reporters talk about teams wanting to avoid "starting the repeater clock," this is what they're referring to. If you're close to the line and can reasonably get or stay under, it makes long-term sense to do so. It could prevent having to make tough decisions down the line.

First let's look at which teams crossed the line last season and where they sit now. All salary data via Basketball Reference. (Note some strikethroughs and italicized corrections of the data. Apologies for the initial mistakes in calculating the figures.)

  • Atlanta: The Hawks disastrously finished 2011-12 less than a million above the tax line. They are currently $900,000 above right around the tax line for 2012-13, which means they desperately need to make some sort of move to get out of the repeater course of action. A Josh Smith trade could easily handle this, but if all else fails, spinning off Ivan Johnson, Jordan Farmar, Johan Petro or Anthony Morrow would do the trick. The Hawks could definitely get a real second-round pick for Johnson, Farmar or Morrow; Petro may be worth a 2027 second-round pick protected through pick No. 59 plus cash considerations to cover his salary. (Edit: the Hawks are not over the line, and Farmar has been waived. He had a memorable Atlanta career, obviously.)
  • San Antonio: The Spurs crossed the threshold in 2011-12, which was fairly unSpursian. They are about $9.5 million over the threshold just under the threshold this season. This is not a market or owner (Peter Holt) that can or will be a repeater. But it'd be pretty much impossibly to escape the tax this season. The respite is in the fact that Stephen Jackson's contract comes off of the books at season's end; that clears off $10 million. In addition to that, Manu Ginobili's $14 million deal expires. If he remains in the league -- don't rule out retirement -- he'll be much cheaper next year. Expect San Antonio to remain over the apron this season but sneak under the next two years. (That said, S.A. will and should try to lower their tax bill for this year. Dropping DeJuan Blair as rumored would save $1 million in tax, which is something.
  • Dallas: The bright side of missing out on major free agents is avoiding the tax. The Mavericks exceeded the line by a couple million dollars in 2011-12, but sit $10 million below the threshold this year. Barring a massive salary-grabbing deal, the Mavericks won't pay repeater tax in 2014-15.
  • Miami: The Heat are $15 million over the tax line. So long as the team has the Big Three, they will be paying the tax. They may hit a total payroll including tax of about $150 million in 2014-15, if the superstars all opt in. The repeater tax was built to punish teams like the Heat for being so good.
  • Boston: There's no way Boston's getting under the line this season, even if a fire sale is held on Thursday. They'd need to drop $22 million in salary, and with the NBA's salary-matching trade rules and so few teams under the cap, it's just not possible. The Celtics are just more than $1 million over the threshold this season. The Celtics also have $70 million locked up for next season with 10 players under contract. Barring a Kevin Garnett or Paul Pierce trade, the C's will be staring down the repeater in 2014-15 ... unless they can some salary at the deadline. Of course by that point, one or both could be retired and Boston might not be in a position to go over the line to compete. The end of this Boston run might actually time out perfectly to avoid crazy tax bills (in excess of the current crazy $22 million tax bill). (Explanation for the edits: I neglected to deduct the Celtics' numerous cap holds from their cap figure. My regrets.)
  • L.A. Lakers: See Heat, Miami. No chance they avoid the repeater tax so long as Kobe Bryant is making $30 million a year.

Those are the teams who went over the line last year. There are a couple more teams to add to the club this season who could be looking at the repeater in 2015-16.

  • Golden State: The Warriors are about $800,000 over the apron. They could find a home for Brandon Rush (out of the year, $4 million player option for 2013-14 he'll definitely pick up), but this could be tricky. With Stephen Curry's extension kicking in next year, it's pretty darned imperative that the Warriors conjure up a way to slide under the line by Thursday afternoon. They could be forced to give up Jeremy Tyler and Charles Jenkins.
  • Brooklyn: The Nets were under the line last season, so they won't be on the hook for the repeat in 2014-15. But getting that status for 2015-16 and beyond is pretty unavoidable at this point.
  • Chicago: The Bulls are $4.5 $3.9 million over the line, and it's hard to see how they slide under barring a major deal, such as one involving Carlos Boozer. Trading Rip Hamilton or Kirk Hinrich plus a minimum contract player could do it, but both Rip and Kirk are on the books for not insignificant salaries next season ($5 million and $4 million, respectively). The Bulls are going to have to get creative this year and next to avoid becoming a repeater, even with Jerry Reinsdorf's famous salary modesty. With four expensive starters, there's only so much you can do.
  • Denver: The Nuggets are just under the line. They basically cannot add any salary whatsoever and avoid the line. So you know.
  • L.A. Clippers: The Clips are just under the line by roughly $1 million. One assumes the team would prefer to avoid the line in case offseason moves result in a higher payroll for next year. But thanks to the fact that Blake Griffin is a young max player and most of the role players (excepting DeAndre Jordan) are relatively cheap, L.A. isn't in imminent danger of becoming a repeater.
  • Memphis: Safe for now, thank you very much.
  • New York: The Knicks will be well over the line this season. So long as Amar'e Stoudemire is soaking up $20 million of cap space, New York will be unlikely to slide under the line. Thanks to a rare sub-tax payroll in 2011-12, they'll avoid the repeater in 2014-15. But expect them to suffer it in 2015-16.
  • Oklahoma City: The Thunder are within a million dollars of the threshold. They will not cross it this season. Keep in that mind as you hear rumors floating around.
  • Utah: Within $4 million of the line, so any potential Paul Millsap or Al Jefferson couldn't add too much salary. Both are free agents at season's end, so a deal would be more about improving the team and not letting talent walk away for nothing.
  • Sacramento: The Kings are only $12 million under the luxury tax line, the closest they've been since 2008-09. So watch out!

So that's what you need to know about this repeater tax business heading into the darkest hours of Deadline Watch 2013. It'll be but one factor in the moves teams decide to make or not make, but it's a new factor that GMs are just getting their arms around (especially in terms of other teams' willingness to flirt with it). Keep it in mind as you enjoy the bold flavors of trade rumors over the next 24 hours or so.

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