The era of player empowerment rages on. Bonafide superstar James Harden successfully scratched and clawed his way out of Houston after publicly demanding a change of scenery. We can debate all day long how he went about forcing the move, or how he might fit in with his new running mates (check out Sam's post for an on-court breakdown of the trade), but the fact of the matter is, the NBA is a business. Moving players involves shuffling contracts and that alters the spending power for each organization involved in this bold transaction. Each team carefully determines how long each player is under contract, whether or not they have trade bonuses, when they are eligible for extensions, and several other factors before pulling the trigger. How does this deal help or hurt the books for each party? Time to dive into the dollars and cents at play here.
The Nets were on the hook for an absolutely enormous tax bill before adding on one of the highest paid players in the association and the trade certainly doesn't cut them any breaks in that department. Luxury Tax bills are quite simply one of the costs of doing championship level business in today's NBA. Not all owners have the gull to go such radical lengths with their money to realize title aspirations (see Houston GM Tillman Fertitta) and diving head first into tax hell doesn't always reap the intended benefits (see the 2013-2016 Brooklyn Nets or 2018-2020 Philadelphia 76ers), but it's next to impossible to win without recruiting expensive elite talent. You gotta pay to play, as they say. The Nets sent out Caris LeVert, Taurean Prince, Jarrett Allen, and Rodions Kurucs. Add up the salaries and the Nets shipped out a total of $34,143,758 in salary. Even so, Brooklyn ended up taking on more money in bringing on Harden by himself. He is slated to make $41,254,920 this season alone. So what's the damage? According to the website No Trade Clause, The Nets find themselves in a familiar place by staring a spreadsheet reading $161,538,221 dead in the eyes. That puts them a full $30 million over the tax line, let alone the salary cap itself. Must be nice to be able to draw upon those blessed New York market resources.
Even so, that tax bill won't be easy to swallow. You might recall that for every dollar a team spends over the cap, it adds on an increasingly punitive tax bill on top of that. The Nets have demonstrated a stance of aggression in pursuing this deal so diligently, even though they already have a significant amount of salary on their books and Harden has damaged his reputation by going through a messy breakup with the Rockets. More on their salary situation in a moment. Understandably, they want to take advantage of the guaranteed years left on Irving and Durant's contracts, which isn't that long if you think about it. Durant signed a four year deal in the Summer of 2019, but he missed the entirety of his first year due to injury. That only leaves two fully guaranteed years left - 2020-2021, and 2021-2022. The 2022-2023 season is a player option, so he will be free to test the free agency waters at that time if he so chooses. As for Kyrie, he can hit free agency the same year as Durant if he wants to. In fact, the Big 3 of Durant, Harden, and Irving all have a player option in their contract two seasons from now....how convenient is that? It's unlikely any of them try to leave after sacrificing so much to make this union work, but if Brooklyn wants to mitigate risk here, they can extend the contracts of any of those three players starting this offseason. By that time, they will only have one guaranteed year left on their deals, so the Nets will likely put a ton of thought into locking them up for longer at that point. Here are the rules behind extending veterans per Front Office Insider Bobby Marks and the CBA:
- The maximum years allowed on a player's deal at one time is FIVE, including the years left on their current deal
- Player's currently under three and four year contracts are eligible to be extended beginning on the second anniversary of that contract signing
All three stars fulfill these criteria, so they can be extended later this year. Whether or not the Nets decide to exercise that right, the next few years will be a significant hit on the organization's bottom line. Hopefully they can make the extravagant spending worth it by winning at least one championship. Anything less would deem this experiment a failure.
Luxury Tax Space: -$30 Million
Houston's GM is a penny pincher ironically enough, so he is surely thrilled that this deal provides some breathing room in relation to the tax. They're still within striking distance of it ($5.6 million away at the time of this writing), but that's plenty of room to make a any necessary minimum signings and not have to worry about rubbing up against that limit. After taking part in this deal, Houston has two new players on their roster: Rodions Kurucs and Victor Oladipo. The Kurucs acquisition is pretty inconsequential, as he is only owed $1.7 this season and $1.8 million for next season that is non-guaranteed. He might not even be on the roster at this time next year, if we're being honest. What Houston is excited to grab (besides just about every draft pick Brooklyn has for the next six years) is Oladipo and his $21 millon expiring deal. The fact that his deal is expiring is important, because we're still not quite sure if he is capable of finding his pre-injury form. If that ceiling is obtainable, or at least the Rockets organization believes it is, then he could be in line for a deal approaching max territory. He will have eight years of experience at the end of this season, so that puts him in the 30% cap club when projecting a max contract.
If we do the math based off of an estimated salary cap of $112 million for next season, that means a max contract for Oladipo would come with a starting price tag of around $33 million. That would be a ton of cash to commit to him, even in his athletic prime if they're not entirely sure he can get back to being the All-NBA/All-Defensive player he was just a few short years ago. If the prospect of paying up for him makes them a bit squamish, trading him could be an option. Even at $21 million, he could command a decent return from another team that decides to make a deal with them. The fact that he could walk after the season is probably a big reason as to why Indiana moved him for Caris LeVert, who has multiple guaranteed years remaining. Losing Harden and then the player that would be coming in to fill the void left at his position would be a huge hit for Houston and the possibility of replacing him on the open market in 2021 free agency is not promising if they're looking for someone who could approximate the impact even a diminished Oladipo would leave behind. The closest available comparison is probably Josh Richardson, who would have to decline his $11.6 million player option just to hit the open market.
If that's the best Houston would be able to do in the event Oladipo walks, they should consider the risk they'd run in riding out the season with him. Add in the fact that Oladipo has been rumored to have a desire to play in Miami, and he might not be long for the Rockets, even with the potentially beautiful on-court fit he could strike with John Wall. They could open up nearly $25 million in cap room by shedding some salary this Summer, but that's not very valuable since it's not even close to the space required to sign a max player. One last factor in this deal to consider for the Rockets is the $15.45 million trade exception that was created by creating two transactions. They first traded for Caris LeVert, then flipped him for Oladipo. This tidbit was intentionally left out until the end of this section since they most likely will not use it. A trade exception can be used to bring in an additional player independent of other exceptions like the mid-level, but that player would still count on the books for Houston and that of course is a no-no for team management. They are avoiding the tax at all costs. The next six months will be a fascinating journey to follow when it comes to this team's spending habits since they want to remain competitive, but retaining arguably their best player could result in going against the golden rule of the luxury tax. We'll see which desire comes out on top.
Luxury Tax Space: $4 Million
The Pacers are actually closer to the luxury tax than the Rockets, due to the three lucrative deals they've handed out in the last couple of years. Malcolm Brogdon, Domantas Sabonis, and Miles Turner are on tap to make $58,500,000 this season combined, which isn't terrible, but every dollar counts when you're operating in a market as small as Indianapolis. The aforementioned Victor Oladipo used to occupy the the lead spot on their books, but he has been swapped out for the cheaper Caris LeVert. The advantages of this deal are obvious from Indiana's side. For one, they no longer have to weigh the risk of resigning Oladipo to an inflated deal against losing him for nothing in free agency. With LeVert, they get a similarly talented player for around $5 million less this season and have the benefit of having him under team control for the next two after this one. It should be noted that the reason he is under such a team friendly deal is that he has suffered from injury issues that past few years. LeVert has only played more than 57 games one season in his career so far. That is certainly not the best track record when examining how healthy that player is going to be for your team over the long haul. Nonetheless, LeVert is capable of being a scoring machine and that ability will pay dividends when the Pacers are marching their way into and through the postseason, trying to avoid another first round exit. They've always been pecky on defense, but their offense has had a habit of holding them back before. Injury prone or not, LeVert's presence offers a new glimmer of hope, especially paired with a new coach that is properly utilizing all the players on the roster right now.
Continuity is an element of roster construction that the Pacers have priotritized for quite sometime and after taking a quick glance at their books, it's brutally clear just how much they love having players on their books for multiple years. All four of their top earners are signed through the 2022-2023 campaign and one of them, Sabonis will be on the books for another season. He won't become eligible to become a free agent until 2025. More surprisingly, none of these players have any sort of option in their deals. No one will be skipping town prematurely unless they really, REALLY want a change in scenery. There don't appear to be too many downsides to the deal that Indiana struck here. It's possible that Oladipo returns to his pre-injury form and that version of him is unquestionably better than LeVert currently. Still, that is not a highly likely scenario and even if it does come to pass, it would make it that much more difficult for Indiana to avoid the tax line. Not a place that small city wants to be. Overall, Indiana did not act out of necessity or haste here and that's why they made such a low-risk deal. Many will tell you Brooklyn came out on top here, and it's very possible they will if they end up winning it all. Just as easily however, the Pacers could end up winning this trade by making a deep playoff run and keeping their books super clean for the next several years. That would bring smiles to the faces of management and fans alike.
Luxury Tax Space: $4.5 million
Remarkably, Kevin Love is still on this roster and is owed $91,459,342 through 2023. That salary and his well-documented issues with remaining healthy make him extremely difficult to move off of. The team has most likely accepted that harsh reality and have turned their attention to bolstering the talent available on the Cavaliers roster, who are still trying to rebuild their identity post LeBron. Cleveland participated in this trade to acquire Jarrett Allen and Taurean Prince from the Brooklyn Nets and it didn't cost them much of anything. All they had to give away was their own 2nd round pick and a 1st round pick that originally came from Milwaukee. Prince is a nice cost controlled asset who is owed $25.2 million through 2022 and he will be a solid veteran presence for a Cavs team seeking a little more leadership with all the young players on board. He will be easily tradable since he occupies a popular archetype in the league (3 and D) and doesn't command too many dollars or years on his deal. The crown jewel here for Cleveland though is obviously Jarrett Allen though. He is still young at 22 years of age, he is still on his rookie deal with only $3.9 million owed this season, and he is easy to build around.
This signals that the team is ready to move on from Andre Drummond, so it will be interesting to see who they can bring back with that substantial $28.7 million of his. Also, be sure to keep a close eye on what prices get thrown around when it comes to negotiating Allen's next deal. Yes, Allen is already gearing up for his second league contract, which should be solid, if not overwhelming. There is definitely a market for centers with his skillset around the NBA. He has already established himself as a legitimate rim deterrent and lob threat, with a nice knack for finding the ball going into rebounding situations. No matter how you slice it, Cleveland came out better in this deal then they did going in. With Drummond's contract either being flipped for cheaper assets, or coming off of the books completely if he were to remain throughout the rest of this season, the team is starting at $20 million in cap space, which they can use to spice up the roster on the margins, before rewarding Allen with a shiny new deal. We can't look at how this team completed the deal the same as the others. Brooklyn, Houston, and Indiana are much closer to contention than Cleveland and they were looking to gain or maintain a competitive roster. The Cavs are making progress, but still not ready to win at a high level right now. For them, it was all about asset collections that they look forward to cashing in soon. This Front Office just made another move worthy of applause and it might mean we need to take the organization a bit more seriously in the future. They could be on to something.
Luxury Tax Space: $2.3 Million
*Cap Sheets provided via notradeclause.com