Wednesday, July 10, 2013
Luxury tax in focus
By Chris Forsberg
The Boston Celtics formally received their luxury tax bill for the 2012-13 season on Tuesday and will owe $1.182 million dollars. It's the sixth straight season the Celtics have paid tax, showing ownership's commitment to spending in order to be competitive.
But the Celtics have to be kicking themselves a bit. While the team was well aware it would be in the tax, it was so close to not being over the line last season that it could have put itself in better position moving forward if it had managed to sneak below. After all, there was a lot of dead money on the books this season, like the $400,000 paid to Keyon Dooling after he retired mid-summer (only to sign with Memphis later in the year) or the $237,000 paid to Dionte Christmas as part of a partial guarantee (he did not make the roster out of training camp), or the $180,773 paid to Darko Milicic who ditched the team while suggesting he was homesick early in the season. It's hard to fault Boston for the extenuating circumstances of Dooling and Milicic, but it muddied the books nevertheless.
The Celtics were hard-capped last season after using the full value of the midlevel exception to sign Jason Terry and had to stay within $4 million of last year's luxury tax line ($70.3 million). Even in an up-and-down campaign, credit the team with doing all it could to field the most competitive roster possible.
But with repeater rates looming after the 2013-14 season, the Celtics could have given themselves a little bit of additional freedom for the 2014-15 campaign. Teams are exposed to those harsher repeater rates when they've been in the tax for three of the previous four seasons. That means that, even if Boston manages to get below the tax line this year, it will still be a repeater in 2014-15.
The NBA formally announced its salary cap ($58.68 million) and luxury-tax threshold ($71.75 million) for next season on Tuesday. Upon completion of the pending blockbuster swap with the Brooklyn Nets, the Celtics are expected to be dancing around that luxury tax line again. If, as expected, the team takes back Keith Bogans as part of a sign-and-trade during that Nets swap, the Celtics will be hard-capped again next season and will need to stay on the tax apron (up to $4 million over, or $75.75 million).
As the Celtics endure a makeover process, it could benefit the team to try to shimmy below the tax line this year, especially with incremental tax rates looming this season (for instance, teams will now pay $1.50 for every $1 over the tax line for the first $4.99 million over the tax line, and rates scale up from there based on how much a team spends.)
Earlier this month, Celtics president of basketball operations Danny Ainge noted on the tax, "We don’t want to get into that repeater tax mode. But the good news about our team, and our owners in particular, they have proven a willingness to pay tax. But you don’t want to pay tax just to pay tax. But our ownership will pay tax if needed."
Indeed, Boston has paid tax six straight seasons and seven of the 10 years since it was instituted. Hop HERE to check out a team-by-team tax matrix from the amazing salary site ShamSports.com. Only four teams (Knicks, Mavericks, Lakers, and Trail Blazers) have paid more tax than Boston, which has paid $47.3 million in taxes over the past decade.
If Boston can stay below the tax line this season, there's the added benefit that 50 percent of the total tax payment the league takes in is split and distributed among non-tax teams. With a team like Brooklyn set to make what's currently projected as a $75 million contribution, that's a potentially attractive bonus to teams that stay below the tax line (and those teams can thank Boston for running up the Nets' salary with the pending trade).