Why the Blazers Aren’t Splurging Cap Dollars This Summer

The Portland Trail Blazers have had a moderately successful summer so far, re-signing guard-forward Norman Powell to a long-term contract and trading for forward Larry Nance, Jr. Aside from those two players, their hopes for improvement rest on a handful of minimum-salary acquisitions and the promise of a new coach.

In the face of summer reality, the most-asked question in my email inbox ends up being some variant of this one, submitted by one of the many Michaels who read the site:

Dave,

Why aren’t we making moves? It seems so obvious that we improve or fail this season especially with Dame getting on the fence. We need to keep him! So why isn’t Olshey getting anyone with the mid-level? Why aren’t we probing for more trades? In my eyes it’s not even glass half empty or full. More like a big bucket of nothing. We can’t be this rose-colored about our chances can we? Or do the Blazers just not care anymore?

Michael

Gotta tell you, Michael, “Big bucket of nothing” got your variant of this question picked above everybody else’s. Well done.

So... we’ve talked about most of the reasons for inertia: Neil Olshey’s public statements that coaching was the main issue with last year’s Blazers, his historical fondness for the current backcourt, and the intricacies of trying to make trades. There’s one other factor we haven’t covered, and it may be more important than all the rest combined. It’s partially of Olshey’s making, but he doesn’t have full control over it at this point. In this matter he has to answer to powers greater than he: ownership and the NBA rulebook.

That factor is the salary cap. It looms like a cliff over the front office, casting a shadow over everything they do, or might want to try this summer.

Here’s the issue. The Blazers are currently carrying 13 players plus a two-way contract. With that semi-incomplete roster, they’re hovering right around $140 million in salary obligation. The luxury tax threshold is $136.6. They’re over it, having not used their complete mid-level exception, having not signed any new players except to minimum contracts.

For those unfamiliar, the luxury tax is a rulebook-imposed penalty on teams that spend too much money on their roster. For every dollar over the threshold, a team is penalized an extra amount, ranging from $1.50 all the way northward of $4.00, depending on how far over the threshold they go. So a $1 million contract costs them $2.5 million in real dollars at the lowest level. At the highest levels, the tax penalty basically quintuples the cost of the signing, so your $10 million player costs you $50 million.

At the end of the season, tax penalties are tabulated for all tax-paying teams. The fines are split among non-taxpaying teams. So a team over the threshold both incurs a penalty itself and forgoes the windfall of collecting the tax dollars from others.

That’s the basic primer, but that’s not the whole story for the Blazers.

For teams that have been habitually naughty with their spending, the NBA invokes the Repeater Tax. It adds an extra dollar to each level of the penalty. So now your $1 million contract costs $3.5 million—more than triple—even at the lowest level. The cost gets near-unmentionable at the highest levels: approaching and exceeding $5 in tax for every dollar spent.

For comparison, this is like you ringing up a $2 bottle of soda and having to pay $12 for it instead. Now multiply by a million. Not OK.

Teams don’t like going into luxury tax territory if they can avoid it. Teams really, REALLY don’t like living in repeater tax territory.

Here are the things you need to know:

1. Repeater Tax is triggered when a team has spent 3 of the last 4 years over the tax threshold.
2. Portland has spent 2 of their last 3 years over the line. If they finish this season over the tax limit, they’ll pay repeater tax penalties.

It gets worse. Last year was Portland’s only “under the tax” season in the last three. If they get dinged with the repeater tax this year, they’ll be at risk for it next season and the one after as well.

Some franchises are willing to suffer this penalty. The Golden State Warriors and Brooklyn Nets are destined to do so. They have the commonality of having won, or planning to win, championships. Paying repeater tax for a habitual first-round exit team? That’s not going to happen.

The issue isn’t going away either. Next year the Blazers will be obligated to $107.3 million in salary, about $29.3 million short of this year’s tax threshold. Here’s the problem: that only accounts for 6 players under contract. Even if the threshold rises, they’ll have to fill those other 8 slots—more than half the team—for a total salary in the low $30 million range.

The season after, 2023-24, the Blazers are theoretically obligated to $108.4 million in salary with only 4 players under contract.

This isn’t just about paying extra money for a season, then dodging out of it. If the Blazers aren’t careful, they’ll repeat and repeat and repeat...and for what?

Instead, I fully expect the Blazers to go the other way. If this year doesn’t get off to a stellar start, they’ll attempt to move Jusuf Nurkic and/or Robert Covington at the trade deadline for enough cap savings to get them under the threshold. If they traded both, they could take back $20 million, presumably taking back a center as part of the package. (Hey there, Jarrett Allen...)

Obviously the Blazers could also make interim trades to save money. Or they could just bite the bullet on a CJ McCollum deal and try to shave a few million dollars off of his $30.8 million cap obligation.

By the way, here’s a fun piece of trivia. In July of 2017, in order to dump recently-re-signed Allen Crabbe to the Brooklyn Nets—the Blazers took forward Andrew Nicholson in return. They waived him immediately, but instead of absorbing his salary hit on that year’s cap, they stretched it out over the next seven seasons. They’re still paying $2.8 million per year for that trade, and will continue doing so through 2023-24. That money alone doesn’t put them over the threshold, but it would sure take the pressure off any mid-season deals.

Under these conditions, you can see why they’re not jumping to use their mid-level exception. Every dollar they add compounds the problem this year and the risk in years to come. They’ll need to be darn certain that the incoming player lifts their chances before they’ll make that kind of spending commitment. Players available for the taxpayer’s mid-level exception generally don’t.