Chronic taxpayers will pay heavy price

November, 28, 2011
11/28/11
9:30
AM CT
The tentatively agreed upon collective bargaining agreement certainly could have been more damaging to the Dallas Mavericks' immediate goals, as Tim MacMahon writes in his column today. Had the more punitive luxury tax structure taken effect for this season, Tyson Chandler's chances of re-signing with the Mavs would be dangerously low.

Instead, there will be a two-year grace period before the old dollar-for-dollar system is replaced by a more aggressive financial hammer (SI.com obtained official terms of the tentative deal). As an example, Mavs owner Mark Cuban paid $18 million in luxury tax last season on an $88 million payroll ($18 million over the $70.3 million luxury tax threshold). Under Year 3 rules, Cuban would have coughed up $38.5 million in luxury tax.

Still, Chandler's return isn't a slam dunk. He'll have plenty of suitors and big bucks to sort through. But, the Mavs at least know that they can bid high and have two years to live under the old luxury tax rules and then deal with ways to chop salary before the Year 3 tax hike kicks in.

However, there is one new deterrent that takes effect immediately and will make even the most free-spending of owners take notice: A substantial tax increase will slam chronic taxpayers, as Mavs owner Mark Cuban has been since the luxury tax came into existence.

Under the new CBA, tax rates for teams that are taxpayers in at least four out of any five seasons increase by $1 at each increment. For example, for a team salary up to $5 million above the tax level, repeat offenders will pay $2.50 instead of $1.50 for each $1 over; $5 million - $10 million above the tax level, offenders will pay $2.75 instead of $1.75; $10 million - $15 million above the tax level, the penalty is $4.25 instead of $3.25, etc.

Owners such as Cuban, the Los Angeles Lakers' Jerry Buss and the New York Knicks' James Dolan, three of the league's most egregious luxury taxpayers, will have to find inner-discipline and begin planning for payrolls that don't exceed the luxury tax, or at least once in a five-year span.

The Mavs' payroll will rise above the tax line again this season (expected to be around $70 million) with or without Chandler. In 2012-13, they have about $44 million stamped for six players (not including Chandler) and three of those are low-wagers Corey Brewer, Rodrigue Beaubois and Dominique Jones. Jason Kidd and Jason Terry come off the payroll after this season, and clearly there will be significant holes to fill, and that could again mean a payroll that will challenge the tax line.

In 2013-14, $41 million is earmarked to just three players -- Dirk Nowitzki ($22 million) and Shawn Marion and Brendan Haywood (more than $9 million each). An amnesty clause allowing teams to wipe a contract off the books can help, but again, if the Mavs have Chandler signed to an annual salary of $10 million or more, filling out a contending team around Nowitzki could push the threshold.

The two-year grace period before the new incremental and more punitive luxury tax system takes effect is a big assist for a team like the Mavs. But, the significant tax hike for repeat taxpayers is a twist that can't be ignored by owners, even those that play to win at all cost.

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TEAM LEADERS

POINTS
Dirk Nowitzki
PTS AST STL MIN
21.7 2.7 0.9 32.9
OTHER LEADERS
ReboundsD. Nowitzki 6.2
AssistsM. Ellis 5.7
StealsM. Ellis 1.7
BlocksB. Wright 0.9