Tuesday, July 2, 2013
Nets face record $80 million luxury-tax bill
By Mike Mazzeo
NEW YORK -- Brooklyn Nets owner Mikhail Prokhorov will be paying approximately $180 million for his team's roster next season -- including $80 million in luxury taxes, according to a league source.
The previous high for a luxury-tax bill is believed to be $51.9 million, paid by the Portland Trail Blazers in 2002-03.
Assuming they use their remaining three roster spots (one taxpayer mini midlevel exception and two veterans minimums), the Nets' payroll would be around $100 million.
Their projected starting five alone -- Deron Williams ($18.5 million), Joe Johnson ($21.5 million), Paul Pierce ($15.3 million), Kevin Garnett ($12.4 million) and Brook Lopez ($14.7 million) -- will make about $82.4 million combined in 2013-14.
To put that $180 million figure into perspective, it represents just 1.3 percent of Prokhorov's net worth -- $13.5 billion, according to Forbes. Also consider: In May 2010, Prokhorov paid $223 million to acquire 80 percent of the team and 45 percent of Barclays Center.
The reason the Nets will have to pay so much in luxury taxes is that, starting in 2013-14, teams will no longer be paying one dollar for every dollar they're over the tax level. Instead, an incremental system will be implemented, with rates increasing based on how much a team exceeds the tax.
(For a detailed explanation, please visit ESPN salary-cap guru Larry Coon's blog and scroll down to item 21.)
According to ESPN.com's Marc Stein, the projected salary cap is $58.5 million with a luxury-tax threshold at $71.6 million. That projection is not binding until a July audit is performed.
Money collected in luxury taxes is either distributed to teams or used for league purposes.
The New York Yankees, who under late owner George Steinbrenner began to spend like crazy in the early 2000s, have a payroll of $203 million this season. The Yankees paid out an MLB-record $26.9 million in luxury taxes in 2008.
But the Yankees are adamant about not wanting to pay the luxury tax going forward, which is why they're prepared to not spend more than $189 million in 2014.