The Blazers 2017-18 Luxury Tax Situation

The Mo Harkless signing put the Blazers about $19M over the salary cap this year, but kept them barely under the Luxury Tax level by about $100K. I think that makes it pretty obvious what role the luxury tax played in Mo's $9M salary. Assuming the usual 7.5% raises, that $9M first year salary will total up to the reported $40M over 4 years.

However, the Blazers will be dealing with the Luxury Tax in 2017-18 and likely beyond.

The Blazers now have 14 roster spots filled with guaranteed contracts. Montero is in the 15th roster spot with a non-guaranteed contract. They signed Tim Quarterman to a non-guaranteed $540K "training camp contract" today, and may sign additional training camp players in the weeks ahead. They can carry 20 players until the season starts, but then they have to get down to 15 players. I'll ignore Quarterman and other future training camp contracts in the table and discussion below. If one of them beats out Montero or another guaranteed player for a roster spot, their salary should be less than the player they replace and not take us over the luxury tax threshold this year.

To set a baseline for discussing the Luxury Tax situation in 2017-18 I'm assuming in the table below that Plumlee is simply allowed to walk away as a RFA next summer (2017), or traded for a future (non-2017) draft pick, and is replaced by a #20 draft pick from the 2017 draft. There are of course other scenarios where Plumlee could be traded for a player or an additional 2017 draft pick that would add to our 2017-18 team salary, or Plumlee could be retained as part of the team. So the table is simply a baseline that assumes Plumlee is gone without increasing our team salary. It is not a prediction.

The table shows that if we retain all of our current players except Plumlee, and add a #20 draft pick, we will be $37M over the salary cap next summer. That puts the Blazers $17.1M over the Luxury Tax threshold. If we were to extend Plumlee this October, or match or re-sign Plumlee as a RFA next summer, we could easily be $30M+ over the Luxury Tax threshold. However, Neil could still decide to try to extend Plumlee this year and keep his options open to use Plumlee in a large consolidation trade next summer, or retain him if other trades are made.

The Blazers have team options or non-guaranteed contracts for 2017-18 with 5 players - Vonleh, Napier, Connaughton, Montero, and Ezeli. Vonleh and Napier are on Rookie Scale contracts and their options must be picked up by October 31 of this year or they become Unrestricted Free Agents next summer. The 2017-18 combined salaries of Napier, Connaughton, and Montero is only $4.4M and after replacing them with minimum salaried players would only net $2.7M in savings.

The Blazers may decide to operate well into Luxury Tax territory after the 2016-17 season. I find it very encouraging that Paul Allen must have given his approval for Neil to be in this situation now. However, he may just be waiting to see how the players perform this season before making a decision about whether to enter deep into the Luxury Tax territory next year, or wait and pull back partially or fully by dumping or trading players.

It's tempting to simply ignore the consequences of the Luxury Tax as Spending Paul Allen's Money (SPAM). We have until the end of each year to get the team salary down to reduce or avoid the financial tax penalties for that year, and the really huge financial penalties don't occur until a team becomes a repeat offender. However, there are other restrictions placed on teams when their team salary exceeds the Luxury Tax threshold or the Tax Apron ($4M over the Luxury Tax threshold). So one might want to be aware of some of those restrictions.

Amongst the restrictions a team can only use the lower Tax-Payer MLE (Mid-level Exception) rather than the higher Non-Tax Payer MLE to sign free agents when the team salary ends up over the Tax Apron, and loses the BAE (Bi-annual Exception) entirely. The MLE and BAE amounts should go way up in the next CBA (2017-18 season). Since we will be way over the salary cap, the MLE will be Neil's only way of signing a non-minimum veteran free agent for quite some time. That could matter while he's trying to pick up a veteran to fill a role as he builds us into a contender again. In addition, Neil will be constrained to 125% vs 150% salary matches in trades if we end up over the luxury tax threshold. These are not disabling restrictions, but they are factors to be aware of that may hamper us in the future. Unfortunately, the restrictions apply when a team ends up over the apron after using a MLE or BAE, or over the tax threshold after making a trade. So it would be even harder to get the team salary low enough that we would not encounter those restrictions.

PORTLAND 2016-17 2017-18 2017-18 Notes
1 Damian Lillard 24,328,425 26,153,057
2 Allen Crabbe 18,500,000 18,500,000
3 Evan Turner 16,393,443 17,131,148
4 Meyers Leonard 9,213,483 9,904,494
5 Mo Harkless 8,988,764 9,662,921
6 Al-Farouq Aminu 7,680,965 7,319,035
7 Festus Ezeli 7,400,000 7,733,000 $1M guaranteed
8 Ed Davis 6,666,667 6,352,531
9 C.J. McCollum 3,219,579 24,000,000
10 Noah Vonleh 2,751,360 3,505,233 Team option Oct 2016
11 Mason Plumlee 2,328,530 Extend or RFA
12 Shabazz Napier 1,350,120 2,361,360 Team option Oct 2016
13 Pat Connaughton 874,636 1,014,746 non-guaranteed
14 Luis Montero 874,636 1,014,746 non-guaranteed
15 Jake Layman 600,000 905,249
2017 #20 Draft Pick 120% 1,560,000
Total Roster 111,170,608 137,117,520
Varejao 1,984,005 1,984,005
Total w/Varejao 113,154,613 139,101,525
Salary Cap 94,143,000 102,000,000
Over Cap 19,011,613 37,101,525
Tax Level 113,287,000 122,000,000
Over Tax Level -132,387 17,101,525

So what do you think Neil Olshey will do about the Luxury Tax next year? Will he ignore it, it's only SPAM? Will he set a lower team salary target and make trades or dump players if necessary to get to that target? Or will Paul Allen tell him he's all-in and only make trades to improve the team? If so, will Plumlee get an extension?