Multiple Choice

Posted by Rob Mahoney on December 6, 2011 under Commentary | 3 Comments to Read

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In yesterday’s Bullets, Henry Abbott noted the following:

If the Mavericks are really being stingy with Tyson Chandler I suppose that could be taken as a sign the new CBA is having some effect. The Mavericks are like the Knicks and Lakers in how they have spent, historically, but they are not at all like those teams in how they earn, and have lost mighty amounts of money as a result. A stiff luxury tax could, in theory, hurt Cuban more than anyone — as he’s one of the owners already feeling the most financial pain.

It’s true — Dallas has historically been a big-spending team, but without the revenue streams that make franchises like the Lakers and Knicks so insanely profitable. Mark Cuban is likely to be one of the first influenced by the new luxury tax as a result, and we may see the implications of that deterrence sooner rather than later.

But if the Mavericks fail to re-sign Tyson Chandler this summer, it will have little to do with the tax or the new collective bargaining agreement. The Mavericks will likely pay the luxury tax this season, but at a dollar-for-dollar rate with a lower overall payroll than last season (largely due to Caron Butler’s salary being off the books), Cuban would get a bit of a financial break relative to his team’s title campaign even if he and Donnie Nelson chose to keep Chandler around. The Mavs’ defensive centerpiece could be had for a sizable financial investment and only a par-for-the-course luxury tax penalty, if only Cuban willed it so.

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The Butterfly Effects, Pt. III: No Rush

Posted by Rob Mahoney on November 30, 2011 under Commentary | Read the First Comment

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With the unofficial, metaphorical ink on the tentative CBA structure beginning to dry, we’ll take to look at how the new agreement impacts the Dallas Mavericks teams of today and tomorrow.

The new collective bargaining agreement is like catnip to NBA fans, who appreciate the return of the league as a general rule, and also have an unquenchable thirst for rumored roster moves. Few things generate excitement on par with a prominent player switching teams, and the amnesty clause included in the new agreement theoretically allows for all kinds of movement involving all kinds of interesting players.

At this point, the clause itself likely needs no introduction. But for those unfamiliar, here is the provision in question, written out in this detailed memo (via SI.com) in plain English:

Each team [is] permitted to waive 1 player prior to any season of the CBA (only for contracts in place at the inception of the CBA) and have 100% of the player’s salary removed from team salary for Cap and Tax purposes.

The rumors that dance through all of our heads are two-fold: not only are there intriguing decisions regarding whether teams should cut players using the amnesty clause at all, but also the possibilities governing which released players end up signing with which teams. Dallas is not a likely landing spot for any of the top amnestied players, for the sole reason that the team lacks the cap space to participate in one of the quirkier elements of the amnesty rule itself:

A modified waiver process will be utilized for players waived pursuant to the Amnesty rule, under which teams with Room under the Cap can submit competing offers to assume some but not all of the player’s remaining contract. If a player’s contract is claimed in this manner, the remaining portion of the player’s salary will continue to be paid by the team that waived him.

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The Butterfly Effects, Pt. II: Remaining Chains

Posted by Rob Mahoney on November 29, 2011 under Commentary | Read the First Comment

With the unofficial, metaphorical ink on the tentative CBA structure beginning to dry, we’ll take to look at how the new agreement impacts the Dallas Mavericks teams of today and tomorrow.

The NBA’s owners entered collective bargaining with several specific goals in mind. Among them: to limit the flexibility of taxpaying teams as much as possible, creating a systemic conflict between high payrolls and roster freedom. As a part of that objective, the new agreement includes a completely remodeled set of salary cap exceptions that reward teams for staying under the tax line, and restrict the free agent involvement of spend-happy clubs like the Mavericks. Dallas will likely be a luxury taxpayer again next season; so the franchise has been for the last six-plus years, and so they may be for the next several. Such is the price of keeping this particular contending core in place. Mark Cuban will be mindful of the wrath of the repeater tax, but that likely won’t stop him from keeping his team in tax territory for the first two seasons of the new collective bargaining agreement, during which he’ll only face a $1-for-$1 luxury tax penalty akin to that of the previous CBA. Cuban has shown a willingness to foot the bill on that tax, but would be understandably reluctant to pay according to the exorbitant demands of the more demanding luxury tax rules that will become active for the 2013-2014 season. But the Mavs’ taxpaying status will still affect their offseason plans on a more immediate timeline. According to a memo detailing the tentative agreement between the players and owners (via SI.com), taxpaying teams will no longer have access to the league’s mid-level exception (a salary cap exception used to sign free agents for up to around $5 million per season); instead, they’ll be forced to make do with the “taxpayer mid-level exception,” a provision that allows for the signing of a free agent to a deal up to three years in length (rather than four) starting at a mere $3 million. Read more of this article »

The Butterfly Effects, Pt. I: Tax the Street

Posted by Rob Mahoney on November 28, 2011 under Commentary | 4 Comments to Read

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With the unofficial, metaphorical ink on the tentative CBA structure beginning to dry, we’ll take to look at how the new agreement impacts the Dallas Mavericks teams of today and tomorrow.

While James Dolan’s luxury tax spending in the mid-2000s would put any other overspending owner to shame, Mark Cuban has shown an impressive tolerance for substantial tax payments so long as the Mavericks are competitive. And, in case you hadn’t heard, Dallas has been competitive for quite some time; 11-straight 50-win seasons has not only put the twinkle in Cuban’s eye, but also the dent in his wallet.

That long-term investment finally paid off with a championship this past June, but the new, more punitive luxury tax could bring hell to Cuban’s finances if he the Mavs continue on their usual spending course. Here’s an excerpt from the league’s official memo outlining the terms of the recent agreement, as release by SI.com:

Beginning in year 3, Tax rates for teams with team salary above Tax level are as follows:

Incremental Team Salary Above Tax LevelTax Rate
$0-$5M$1.50-for-$1
$5M-$10M$1.75-for-$1
$10M-$15M$2.50-for-$1
$15M-$20M$3.25-for-$1

  • Tax rates increase by $0.50 for each additional $5M above the Tax level (e.g., for team salary $20M-25M above the Tax level, the Tax rate is $3.75-for-$1).
  • Tax rates for teams that are taxpayers in at least 4 out of any 5 seasons (starting in 2011-12) increase by $1 at each increment (e.g., for team salary $5M-$10M above the Tax level, the Tax rate for a repeat taxpayer is $2.75-for-$1 instead of $1.75-for-$1).

All of this luxury tax adjustment has been made in the hopes that the variation in spending between teams will be mitigated. Cuban himself has been a proponent of just such a position in the past; as much as out-spending the competition has been one of the Mavs’ distinct advantages, Cuban himself is naturally less than enthused about shelling out extra money for luxury tax payments. A high payroll is one thing, but a high payroll that creates further financial obligations via the tax is another one entirely.

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