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I wrote this post in the paid area of the site and put a little work into it. Then I realized it's worth creating a separate thread to discuss how the luxury tax works, and why the offsets on before the 2017 - 2018 season will be a summer of tough decisions.
Dan Gilbert seems willing to pay the luxury tax within reason this year and into the 2016 - 2017 season. The reality is that teams competing for a championship must, unless they were very lucky to group a few All Stars on rookie deals all in the same window.
Here is the luxury tax penalty before the repeater tax, which kicks in the third consecutive year a team is over the cap. I got the rates at each tax bracket from an article when the new CBA came out two years ago:
NORMAL TAX RATES
Increment: Taxed at: Incremental total: Running total:
$0-$4,999,999 over $1.50 - $1 $7.5 million $7.5 million
$5 million - $9,999,999 $1.75 - $1 $8.75 million $16.25 million
$10 million - $14,999,999 $2.50 - $1 $12.5 million $28.75 million
$15 million - $19,999,999 $3.25 - $1 $16.25 million $45 million
$20 million - $24,999,999 $3.75 - $1 $18.75 million $63.75 million
$25 million - $29,999,999 $4.25 - $1 $21.25 million $85 million
$30 million - $30,463,009 $4.75 - $1 $21,997,200 $87,219,720
The repeater tax is difficult to quantify. Basically, every five million over the cap in the 2017 season is another knee-buckling percent higher in tax for the teams slightly overy the capplication and onot the highest end of 30+ million over the tax line.
REPEATER TAX RATES
Increment:Taxed at:Incremental total:Running total:
$0-$4,999,999 over $2.50 - $1 $12.5 million $12.5 million
$5 million - $9,999,999 $2.75 - $1 $13.75 million $26.25 million
$10 million - $14,999,999 $3.50 - $1 $17.5 million $43.75 million
$15 million - $19,999,999 $4.25 - $1 $21.25 million $65 million
$20 million - $24,999,999 $4.75 - $1 $23.75 million $88.75 million
$25 million - $29,999,999 $5.25 - $1 $26.25 million $115 million
$30 million - $30,463,009 $5.75 - $1 $26,623,020 $117,662,302
Adding in Tristan Thompson and his 7.1 qualifying offer, the Cavaliers are at just about $95 million without JR Smith, which is 25 million over the cap. EDIT: I just read that the report of Thompson signing the QO was hasty and since taken down. After signing JR, we can trust the Cavs will be in that 30+ million over the cap bracket, which is $87 million in tax alone. EDIT: The Cavaliers stand to be in this highest tax bracket of $4.75 per dollar spent whether Tristan signs a QO or longterm deal if the Cavaliers do sign Smith.
The repeater tax for the highest bracket is $117 million a year, so Gilbert is looking at a 30 million jump in 2017. This is the real worry, I believe: being in the highest tax bracket during the 2017 - 2018 season.
Dan Gilbert seems willing to pay the luxury tax within reason this year and into the 2016 - 2017 season. The reality is that teams competing for a championship must, unless they were very lucky to group a few All Stars on rookie deals all in the same window.
Here is the luxury tax penalty before the repeater tax, which kicks in the third consecutive year a team is over the cap. I got the rates at each tax bracket from an article when the new CBA came out two years ago:
NORMAL TAX RATES
Increment: Taxed at: Incremental total: Running total:
$0-$4,999,999 over $1.50 - $1 $7.5 million $7.5 million
$5 million - $9,999,999 $1.75 - $1 $8.75 million $16.25 million
$10 million - $14,999,999 $2.50 - $1 $12.5 million $28.75 million
$15 million - $19,999,999 $3.25 - $1 $16.25 million $45 million
$20 million - $24,999,999 $3.75 - $1 $18.75 million $63.75 million
$25 million - $29,999,999 $4.25 - $1 $21.25 million $85 million
$30 million - $30,463,009 $4.75 - $1 $21,997,200 $87,219,720
The repeater tax is difficult to quantify. Basically, every five million over the cap in the 2017 season is another knee-buckling percent higher in tax for the teams slightly overy the capplication and onot the highest end of 30+ million over the tax line.
REPEATER TAX RATES
Increment:Taxed at:Incremental total:Running total:
$0-$4,999,999 over $2.50 - $1 $12.5 million $12.5 million
$5 million - $9,999,999 $2.75 - $1 $13.75 million $26.25 million
$10 million - $14,999,999 $3.50 - $1 $17.5 million $43.75 million
$15 million - $19,999,999 $4.25 - $1 $21.25 million $65 million
$20 million - $24,999,999 $4.75 - $1 $23.75 million $88.75 million
$25 million - $29,999,999 $5.25 - $1 $26.25 million $115 million
$30 million - $30,463,009 $5.75 - $1 $26,623,020 $117,662,302
Adding in Tristan Thompson and his 7.1 qualifying offer, the Cavaliers are at just about $95 million without JR Smith, which is 25 million over the cap. EDIT: I just read that the report of Thompson signing the QO was hasty and since taken down. After signing JR, we can trust the Cavs will be in that 30+ million over the cap bracket, which is $87 million in tax alone. EDIT: The Cavaliers stand to be in this highest tax bracket of $4.75 per dollar spent whether Tristan signs a QO or longterm deal if the Cavaliers do sign Smith.
The repeater tax for the highest bracket is $117 million a year, so Gilbert is looking at a 30 million jump in 2017. This is the real worry, I believe: being in the highest tax bracket during the 2017 - 2018 season.
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