How the luxury tax may cause Lance Stephenson to leave the Pacers

Mike Ehrmann

The Pacers didn't re-sign Lance Stephenson on the first day of free agency, and now there's a real chance Stephenson could walk. Blame the luxury tax.

At the early dawn of free agency's first light, the Indiana Pacers gave Lance Stephenson the superstar treatment. Per the Indianapolis Star, the Pacers sat Stephenson and his family in a movie theater where they were treated to a biopic about the free agent called Born Ready. The Pacers hosted Lance throughout the first day of free agency, making sure they knew how much they loved him and, even more importantly, didn't allow other teams the chance to do the same.

If this kind of glossy pitch doesn't sound like Larry Bird's M.O., there are reasons to play against type. Bird had reportedly set a "fixed price" on re-signing Stephenson. If he wouldn't pay Stephenson like a max player, at least he could treat him like one.

No doubt this was personal for Bird, as well. He had raised Stephenson as a pro, drafting him in the second round and bringing him along slowly until he became an indispensable starter in his third season. Last year he was being talked about in serious tones for the All-Star Game. If Lance drove everyone else crazy with his spastic play, Bird was firmly in his corner.


Photo credit: Jonathan Daniel

The Pacers also need Lance to return. On a team that struggled to generate offense, Stephenson is their one true creator. A playmaker for whom the word "mercurial" was invented, Stephenson is capable of brilliant passes and bumbling turnovers, occasionally on the same possession. But he is their best passer by far, and beyond him, the Pacers offense is reduced to slow-developing post-ups, contested Paul George isolation jumpers and some of the worst entry passing anyone has ever seen.

Still, the Pacers had a fixed price. Estimated by the estimable Tim Donahue to be between $44 million and $49 million over five years, that would allow Bird — with a lot of other moving parts — to retain his starting five and stay under the luxury tax. Barely.

Lance left the building on Tuesday without an agreement and a whole new group of suitors on his doorstep. ESPN's Chris Broussard called it an "impasse," and had the number at $44 million over five years. But it's not really an impasse between player and team. It's a standoff between the Pacers, the tax number and any realistic chance Bird has to continue adding to his conference finalist.

As Donahue laid out, to get to the offer number for Stephenson, Bird would almost certainly have to part with the last unguaranteed year on Luis Scola's contract in addition to other end-of-the-roster players, as well as break up with free agents like Evan Turner. The last part was not a huge consideration, as it turned out. The Pacers didn't extend a qualifying offer to Turner, making him an unrestricted free agent. So much for the Lance Insurance Policy.

Scola is trickier. Bird used most of his remaining assets to get the veteran forward, trading Miles Plumlee and their 2014 first round pick to the Suns in what was a disastrous move. Plumlee blossomed in Phoenix and the pick could have been used to land a much-needed wing player. This was a win-now move with repercussions, and the Pacers are feeling that right now.

Even if Lance returns, and he very well might, Bird will still have work to do for a team that needs more help. Beyond steady guard C.J. Watson and reliable backup big Ian Mahinmi, the Pacers have holes to fill up and down their second unit, which is why they would like to retain just a bit of flexibility to sign someone like Cavaliers free-agent wing C.J. Miles.

With only a few exceptions, the luxury tax looms behind every offseason move. It is not a hard cap in real terms, but it is an effective deterrent to keep salaries down and force teams to set fixed costs toward retaining and signing players. The Pacers aren't the only team that won't go past it, and the decision to go over the tax is less about owners willing to go the extra mile then about preserving fiscal sanity and roster options.

There is one other way this can go, but it would involve trading a player like George Hill to make it happen. Even then, Bird would be looking at replacing two starters on a very fixed budget.

So, they've reached an impasse. The Pacers need Lance, and one can argue that Lance needs the Pacers, given the amount of freedom he enjoys on the court and the nurturing small-market environment provided by Bird and the city of Indianapolis. It makes too much sense for him to go elsewhere, but that's life under the tax.


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