That honestly might be it for the Thunder, who are now way over the luxury tax threshold with 11 roster spots filled. The other three or four spots could go to rookies or minimum-contract veterans. Per ESPN’s Bobby Marks, the PG and Grant deals line OKC up for $130 million in luxury tax payments in 2018-19 due to various escalators, including the repeater penalty.
This is a small market team that has in the past been reluctant to pay the luxury tax. In fact, that reluctance led to the Thunder trading James Harden instead of giving him a max contract in 2012. Harden is now the MVP. As the scope of OKC’s luxury tax bill became evident early Sunday, plenty of people pointed out the Thunder’s changing mindset on the tax. The important thing is that the Thunder realize they made a huge mistake in 2012, and aren’t making that same mistake now.
In addition to that, things aren’t over yet. The Thunder still have a way out of that massive luxury tax bill: by waiving Carmelo Anthony.
Anthony opted into his $27.9 million contract for 2018-19, taking the payday over trying to secure a multi-year deal as his career winds down. That’s the deal that really causes pain to the Thunder’s salary cap sheet. Luckily, there’s a way out.
Meet the stretch provision
Under the league’s collective bargaining agreement, teams can use the stretch provision to lessen a tax bill or cap hit when waiving a player. Teams are allowed to stretch the salary cap impact of the contract of waived player over two times the length of the contract remaining plus one year. Since Anthony has one year left on his deal, the Thunder could stretch it over three years (1x2+1).
So the $27.9 million owed to Anthony would be represented on the books as $9.3 million in 2018-19, $9.3 million in 2019-20, and $9.3 million in 2020-21. If the Thunder keep Melo around or waive him without using the stretch provision, his cap hit would be $27.9 million in 2018-19 and $0 going forward.
By using the stretch provision, the Thunder would avoid the huge luxury tax pain this season at the cost of limiting salary cap flexibility for two future years.
Is it worth it?
The case for stretching Melo
Cap expert Albert Nahmad crunched the numbers and found that stretching Anthony’s contract would save the Thunder $91 million in luxury tax.
That’s more than a few teams’ entire payrolls. That luxury tax, by the way, gets spread out among non-taxpaying teams. So the $91 million would directly subsidize teams, some of which (like the Utah Jazz, who knocked the Thunder out in the first round this past season) are OKC’s direct rivals. By executing the waive-and-stretch, the Thunder would still be on the hook for roughly $40 million in luxury tax (a huge chunk!) but would no longer be in line for the single highest team payroll in NBA history.
I mean, that’s the entire case for waiving and stretch Melo: the team would save $91 fricking million dollars this year. It’s a pretty good case!
The case against stretching Melo
Here’s the problem with the stretch: because of massive contracts for George and Russell Westbrook, plus smaller but still significant commitments to Steven Adams, Andre Roberson, and now Jerami Grant, 2018-19 isn’t the only year the Thunder are in cap hell. Granted, once Anthony’s contract comes off the books next summer, the nine-figure luxury tax bills end. But the Thunder would still be in the luxury tax going forward.
And stretching Melo would make that worse.
Adding $9 million in dead cap weight in 2019-20 would really hurt OKC’s ability to add talent with the mid-level exception without drawing huge luxury tax bills. By deferring Melo’s contract over three years, the Thunder would make 2018-19 easier to swallow while making it harder to add help for Westbrook and George so long as they have them.
By using the stretch provision, Melo would remain on the books so long as George is committed to OKC. As such, the argument against stretching Melo is that by sucking up the pain now, you actually make it more likely the Thunder can legitimately compete for a title during George’s contract.
Of course, that’s a big pill to swallow.
There are a couple more minor arguments in favor of not stretching Melo. There’s the absolutely, tremendously miniscule shot you could trade Anthony at the deadline to a team with cap space to escape the huge tax bill without tying up future cap space, although you’d have to attach a heckuva sweetener and no team may have quite enough space to absorb such a massive deal without sending some salary back, negating some of the Thunder’s savings.
There’s also the matter of Melo being an actual player who can play actual minutes for OKC if he isn’t waived. Last season did not go well for Anthony, and he remained resolute in being unwilling to come off the bench to the bitter end. But perhaps he can yet be persuaded to buy into a sub role and make a positive on-court difference for the Thunder. It’s possible if not plausible, based on what we saw a year ago.
If you waive him, that’s not possible. Someone else will have to soak up his minutes. That could be good, or it could be bad, depending on who it is.
The final verdict
It’s not my money, but it doesn’t seem wise for the Thunder to stretch him just yet. Let things unfold.