Portland Trail Blazers: LeBron James and the Luxury Tax

Let's have at a couple questions about the best player in the game and the Luxury Tax.

Dave,

I'm fully aware that there is no chance of LeBron James coming to portland, but if portland could clear the space or trade for him somehow while still keeping Aldridge/Lillard, would LeBron object to that? In Miami, it's starting to look like Cleveland, where he had minimal help, as his running mates are rapidly aging. With the offense of Stotts and the players portland has, he would definitely have help. I'm planting this seed just for fun, and maybe it's even blasphemous to think about. I know there is zero chance of it happening, but don't you think that would be a good BASKETBALL move for him? (Other than being in the stacked western conference)

Daniel

Let's be clear and bring some perspective to the proceedings. Acquiring LeBron James would be a smart basketball move if the Blazers had to trade their entire roster in order to get him. (A deal which would be summarily refused by any team he played for, by the way.) The Blazers could pay LeBron 20+ million per year, stack on a few mandatory roster holds, and still have 30-ish million in cap space to play with. This guy has carried teams to the Finals by himself. With sufficient help, he's won championships. If you ever get a chance to lay your hands on the best in the league, you do it no matter what the cost. Worry about everything else later.

I guarantee you if Damian Lillard and LaMarcus Aldridge were playing NBA 2k15 and got a shot to trade themselves for King James, they'd pull the trigger.

As to whether it'd make basketball sense for LeBron, under the conditions you've set--Aldridge and Lillard remaining--then sure. That's a ready-made Big 3. Stack some defenders, shooters, and a little bit of a bench in that lineup and you have yourself an elite squad. This will happen about the same time Phil Jackson dons overalls and joins a bayou jug band, but hey...if you're going to dream, dream big.

Hi Dave,

Is there any scenario where we could offer a 2+1 yrs contract to LBJ (if he hits free agency) and then entice Paul Gasol to a 2+1 yrs contract? All the starters to be kept except for Batum. From the bench I would keep: Robinson, Leonard, Barton, Claver, CJ and Mo (Giving him a 3 year, $6M). A 12 players' roster. Offering LBJ a $15M/yr, Gasol $8M/yr.

I know Portland is a small market for LBJ, but we have Nike for LBJ....and with LBJ we offer a ring option for Gasol.

Thank you,

Carles

No. The Blazers wouldn't be able to clear that much space even if they traded away Batum for a conditional second-round pick. Plus James is taking a huge salary cut there.

If you were an in-demand chef, would you take a pay cut to get a shot at a swanky, upwardly-bound New York City restaurant? You might. Would you take a pay cut to work at Applebee's? No way. There are worse restaurants out there, but there's no discernible benefit to working at a dime-a-dozen chain eatery.

Even with their recent success, the Blazers remain in the murky middle among NBA destinations. They're not bad, but there's nothing to distinguish them from Golden State or Memphis or any other relatively decent team. If NBA franchises were Monopoly properties, the Blazers would be hanging around in the orange section...St. James Place or Tennessee Avenue. That's not bad, but if you give somebody a free chance to take a deed or two, those won't even be in the discussion.

LeBron is the in-demand chef. LeBron gets to choose any property he wants for free. That should answer the question.

BTW, I know that the below scenario puts us over the salary cap (about $67M), but this is when Mr. Allen could use his money.

Thank you again,

Carles

Dave,

Help me understand this.  The Blazers have one of the richest owners in sports but they don't seem willing to go into the luxury tax more than every other team.  What's the good of having the money if you won't spend it?

Paul

The CBA mechanisms--salary cap and luxury tax--don't work like that. I've seen confusion in this area so let's spell it out.

1. The salary cap line defines the payroll amount beyond which teams may not spend or trade players freely, without constraint. Trades and signings are still possible, but they have to fall within restrictive guidelines. (Using limited cap exceptions to sign free agents and making salaries match within "x' amount when executing trades.) A team at or over the cap line cannot make moves outside of those guidelines.

2. The luxury tax threshold penalizes a team for going too far over the salary cap line. Cap exceptions and matching-salary trades both allow wiggle room for payroll to rise. If a team uses its Mid-Level Exception to sign a player for $5 million per year its cap figure rises accordingly. The result is the same if the team makes a trade and takes on 25% more salary than it sent out (quite permissible under the rules). Moves like this edge payroll upwards. Make enough of them and the number can get astronomical. To prevent this, the league forces teams above the threshold to pay money to teams who haven't crossed that line. Restrictions governing exceptions and trades get more strict as well. It's like saying, "Enough is enough," preventing rich teams from gaming the system without cost.

3. The existence of the luxury tax threshold does not eliminate the salary cap line, nor the rules restricting teams above that cap line. They're two different things. This is where the confusion seems to fester.

Folks seem to have the idea that a franchise can leap the space between the cap line and the luxury tax threshold however and whenever they please as long as they're willing to pay the extra cost that crossing the tax threshold mandates. That is not true.

Say the cap is $60 million and the tax threshold is $72 million. If you're sitting at $60 million you cannot opt to sign a free agent for $15 million, push your payroll to $75 million, and eat the tax penalty. Teams at or above the cap line don't have $15 million in cap space to offer that free agent. It's not allowed. Instead they're limited to the aforementioned exceptions, the largest of which is $5 million or so. They can still end up with $75 million in salary eventually but they have to do it over multiple moves...offering three $5 million exceptions to three different players over three years, for instance. All of those moves have to fall within the rules, though.

Simplifying greatly, the CBA divides teams into three categories, each with its own rule set:

Under the Cap

Make any trades or signings you want as long as none of them take you over the cap line when completed. You don't get any special cap exceptions to sign free agents. You just use your available cap space.

Over the Cap Line But Under the Luxury Tax Threshold

You cannot sign free agents except via a couple limited cap exceptions each year, none of which allow you to exceed $5 million offered to any single player. Anyone who wants to make more than $5 million can't sign with you unless you get under the cap.

When trading, you cannot take in more than 150% of the salary you send out (125% in some cases).

Over the Luxury Tax Threshold

The cap exceptions for signing free agents become even more limited.

When trading, you cannot take in more than 125% of the salary you send out.

You have to pay "tax" for every dollar your payroll exceeds the threshold. This starts at $1.50 for every $1 you're over but can escalate above $5 for every $1 you're over. If you're $20 million over, you could end up paying $100 million in taxes alone besides your usual payroll.

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As soon as you cross the line from one category to the next you must abide by the new category's rules, period. No amount of money or will allows a team at or above the cap to act like a team under the cap line.

4. Because the financial penalties get stiff and because draconian restrictions put you at a competitive disadvantage against teams below the threshold, smart teams stay away from luxury tax territory unless absolutely necessary. If you cross that line, you want it to be your last move prior to winning a title, not one of your building moves towards a title. Every move after will be prohibitively expensive and increasingly harder to make.

Since the Blazers are not at elite status yet, they need to keep payroll as low as possible. Since the Blazers aren't one or two players away from becoming a contender yet, they'll need to be careful how many expensive moves they make on their way to the Promised Land. They better not blow their below-tax dollars on three moves if they actually need five to seal the deal. Otherwise they probably won't be able to make the fourth and fifth.

Blasting Portland for not spending a fortune misses the point. They need to get moves right and they need to get them done as cheaply as possible, leaving room for even more wiggling before hitting that tax barrier. Until they get the final piece to the puzzle, the farther they remain below the tax limit, the better.

Keep those questions coming to blazersub@gmail.com, marked "Mailbag" if you will!

Want even more talk about free agents the Blazers can't get? Check out the always-entertaining Phil Naessens Show right here:

--Dave blazersub@gmail.com / @DaveDeckard