Trail Blazers Luxury Tax Questions Continue

In the midst of the Portland Trail Blazers trading and signing their way through the 2021 NBA off-season, salary cap and luxury tax issues have popped up frequently. Last week we published an article explaining why dollars are guiding decisions this summer alongside all the other obvious items on the agenda. Some people had follow-up questions, which we’re covering in this edition of the Blazer’s Edge Mailbag.

Dave,

Does the [luxury] tax stuff really make that big a difference? If we only go over by a little it’s only a few million. It seems bizarre that they’d make big moves just to save that much when they play one player more than 30 million. Penny wise and pound foolish?

Stan from Gresham

When you put it like that, you’re correct. But we can’t just view it in isolation. In context, yes, it’s a big deal for the Blazers to get under the tax threshold this season.

As we said in that previous article, the issue isn’t just the tax, but the Repeater Tax. That’s an enormous penalty on salaries that triggers when a team has been over the threshold in three of the past four seasons. Because it measures a four-year span, violations don’t just disappear after a single season. What the Blazers do this year can potentially affect what happens 3-4 seasons down the road.

Even if Portland only exceeds the threshold by a little and only pays $5-6 million in penalties this season, what happens next year and the year after when they want to make big moves (or re-sign their own players using Bird Rights)? The ongoing Repeater Tax legacy will make those transactions costly.

It’s not just a matter of asking whether a current move is worth the extra pain at the end of the year. You have to ask whether that move might also prevent them from signing the player they want in 2022 or beyond, making the cost prohibitive.

If you want to see why this season is so important, look at the table below:

A “Y” indicates a year spent over the tax threshold, an “N” a year under.

The last three seasons, from 2018-present, are already set: Y / Y / N.

Let’s assume that—already carrying $110-118 million in salary obligations for less than half a roster in 2022-23 and 2023-24—the Blazers will need to go over the tax threshold in those seasons too. Unless they blow up the team, they’re going to have a hard time avoiding it. So we put “Y’s” in those future columns on the chart.

The only difference between the two lines comes in the current season, 2021-22. The top row presumes the Blazers exceed the tax this year. The bottom row presumes they get under the threshold.

You can measure Portland’s vulnerability by putting your finger on any season, then counting back for three more. If you see three “Y’s” out of those four blocks, it’s Repeater Tax time. If not, not.

We’ve already done that for you, shading Repeater Tax years red in the chart. Look at the difference between the two lines! If Portland goes over the tax threshold this season, they’ll pay Repeater Tax this year and likely the two following. If they get under this year, they pay Repeater Tax in none of them, even if they exceed the threshold in 2022-23 and 2023-24.

That’s why earning the “Double N” on the chart is crucial. It breaks up the three-out-of-four Repeater Tax progression and frees the Blazers from worrying whether their $5 million dollar Mid-Level Exception in 2022 is actually going to cost them $20 million because they signed Jusuf Nurkic to a long-term deal.

Hi Dave,

I can’t help but notice the disparity in team salary totals between the Warriors and the Blazers (loosely, $176M vs. $140M).

If do-able, please provide a non-geeky, non-minutia, over-arcing answer to this general question:

Q: Every year the Blazers seemingly hand-wring over spending $4M to avoid a tax penalty; whereas, the Warriors seemingly blow right past that silly barrier with drunken, reckless abandon. Are the Warriors less responsible business people? Are they sociopaths with deeper pockets? Are there two sets of rules? Dave, buddy, how come they get to, but we don’t (insert foot-stomping temper-tantrum)?

There aren’t two sets of rules. There are two sets of priorities.

Golden State’s owners ran up that bill when they were comparatively new in the league. Blazers historians may remember Paul Allen’s notorious billionaire spending sprees in the 1990’s at the behest of lead executive Bob Whitsitt. He went through that phase too, before the Blazers settled down into comparative responsibility and started running more like a business.

But there’s an even bigger issue here: what are they spending the money for?

The Warriors recently won three NBA Championships, with two more NBA Finals appearances besides. They’ve been playing for rings in five of the last seven seasons, and might be again, but for injuries. They could not have achieved more with their investment.

The Blazers made it to the Western Conference Finals once in the last seven years, only to be disposed of by those same Warriors. Other than that, early exits have defined their playoffs runs.

These two things are not the same.

If my financial manager tells me I’m going to spend $500,000 for a Rolls Royce Phantom, I’m nodding and telling them to write the check. If they tell me I’m spending that same half a million for a standard Chevy Camaro, I’m going to tell them where to stick the pen. I like the car, but that level of performance shouldn’t cost that much.

That’s the difference between the two teams and their spending outlays.

Thanks for the mailbag questions! You can always send yours to blazersub@gmail.com or find me on Twitter @DaveDeckard!