Lin could cost more than $43 million
July, 16, 2012
By Ian Begley | ESPNNewYork.com
Just how poisoned is Jeremy Lin's "poison pill" contract offer from the Houston Rockets?
It could cost the Knicks more than $28 million in luxury taxes in 2014-15.
Let us explain:
The easiest way to calculate the cost of Lin's deal would be to operate on the assumption that the third year of Lin's contract -- worth $14.8 million -- would be over the luxury tax line and taxed as such.
If that's the case, the Lin deal would be taxed at three different levels (again, assuming it is counted as salary over the luxury tax line).
The first $4,999,999 is taxed at a rate of $1.50 for every dollar over the tax line.
This comes out to $7,499,999 in tax payments.
The second portion ($5 million to $9,999,999) is taxed at a rate of $1.75 per dollar over the tax line.
The tax total on this portion comes out to $8,749,998.
The third portion of Lin's $14.8 million salary ($10 million to $14,800,000) is taxed at a rate of $2.50 for every dollar.
The tax on this portion of the deal comes out to $12,000,000.
That brings the total tax bill on the third year of Lin's contract to $28,249,997. Together with his base salary of $14.8 million, that would bring Lin's total cost to the Knicks in the third year to $43,049,997 -- assuming his deal in its entirety would be counted as over the luxury tax threshold.
Of course, Lin's deal isn't the only one that would put the Knicks above the luxury tax level in 2014-15.
The 2014-15 salaries of Carmelo Anthony ($24,351,924), Amare Stoudemire ($23,410,988) and Tyson Chandler ($14,596,888) certainly would help get the Knicks into luxury tax territory.
And, don't forget, the Knicks agreed to deals with Jason Kidd, Marcus Camby, Steve Novak and, reportedly, Ray Felton, that will keep these players on the books in 2014-15, as well.
So, if James Dolan is truly upset about the cost of Lin in 2014-15, he should direct some of that anger at himself.
Editor's note: An earlier version of this post concluded Lin's sum cost to the Knicks would be higher. We revised the numbers after consultation with salary-cap guru Larry Coon. (Hey, this is complicated stuff.)
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