tax implications of the Howard deal

[moqui]

John Hollinger reports that the Lakers payroll now sits at $99 million and will go up when they re-sign either Matt Barnes or Devin Ebanks.

the luxury tax level is $70M, so that is $29M in lux tax the Lakers will pay this year

but, next year, it really kills them. Under the new CBA, the tax amount goes up the more you are over the tax line, plus their is a kicker for repeat offenders that takes it even higher. I'm not a cap expert, but my back of the envelope calculations are staggering. As the Lakers will be a repeater, their taxes will be

$2.50 on the dollar for the first $5M ($12.5)
$2.75 for the next $5m ($13.75)
$3.50 for the next $5M ($17.5)
$4.50 for everything over $15M (14 @ $4.5 = $63)
That is a grand total tax bill of $106.75 million

 

[cliftonparksufan]

I might be wrong but I believe this money gets split among all of the teams in the league. That's great but it's never going to stop the rich kids from overspending. Unfortunately there is no realistic solution that all of the teams would ever agree to. Same as in Baseball.

 

[Knicks411]

I don't think the repeater rate kicks in until 2015, so I'm gonna guess with Kobe and Gasol coming off the books that year, they may bring the salary down a bit.

Also, the tax will probably go up a bit between now in 2015, probably not a lot, but maybe a few million.

But in 2014 there is still the graduated rate, $1.5 up to $5 million, $1.75 to 10 million, $2.5 to 15 million, $3.25 to 20 million, and then 3.75 afterwards, with it going up 50 cents for evert $5 million after that.

So say they are $29 million over:
$7.5 million on the first 5
$8.75 million on the next 5
$12.5 million on the next 5
$16.25 million on the 5 up to $20 million
$18.75 million on 20-25
and then $17 million on the 4 million from 25-29

That's still $80 million, which is pretty ridiculous.

Also Moqui, I think you underestimated the repeater fee; it's not just $4.50 for everything over $15 million. It's $4.75 from 20-25, and then it would be 5.25 from 25-30. (Goes up 50 cents every $5 million) So if they were 29 million over the tax as a repeater, I come up with closer to $110 million.

I'd say someone is going to get amnestied. Probably Artest. And they'll probably find a team with cap space and give them $3 million and maybe a first rounder (if they have any to move) to take a guy like Duhon off their hands.

 

[moqui]

I'd say someone is going to get amnestied. Probably Artest.

Artest makes $7.2 this year, $15 over the next two combined

Gasol makes $19M this year and next. He's kind of superfluous in this offense - amnesty him and you are just $10M over and save tens of millions on tax this year and next. of course, that means you have to roll with Jamison as your 4 and your sparse depth is now gone. pick your poison.

 

[Knicks411]

Artest makes $7.2 this year, $15 over the next two combined

Gasol makes $19M this year and next. He's kind of superfluous in this offense - amnesty him and you are just $10M over and save tens of millions on tax this year and next. of course, that means you have to roll with Jamison as your 4 and your sparse depth is now gone. pick your poison.

Yeah, but I don't see them amnestying Gasol. Hell, how much do they save by amnestying Kobe...

 

[The General]

They have a 3 billion dollar deal with Time Warner for the next 20 years. They can spend as much as they want.

I'd look for this to be the year they make a run. Next year they will amnesty Ron. And trade Pau. That's 27+ mil off the books depending on what they take back for Pau (picks, trade exception). The only way Pau returns is if they win. Even then, maybe. Like Odom, he will be used up.

Kobe's contract is a nightmare. 30 mil. But he's earned it. The estimate of his yearly income to the Lakers is at 60-80 millions year just for him. He pays for himself. However, if he wants to come back after two years, he's gotta take a massive pay cut. They cut Shaq loose cause they didn't want to pay him long term. No way does Kobe get an extension paying him over 35-40 a year. He'll have to take 15 or less. Will he?

 

[cliftonparksufan]

Kobe's contract is a nightmare. 30 mil. But he's earned it. The estimate of his yearly income to the Lakers is at 60-80 millions year just for him. He pays for himself. However, if he wants to come back after two years, he's gotta take a massive pay cut. They cut Shaq loose cause they didn't want to pay him long term. No way does Kobe get an extension paying him over 35-40 a year. He'll have to take 15 or less. Will he?

If the Lakers don't pay him, someone else will. Especially teams named the Knicks or the Nets.

 

[The General]

If the Lakers don't pay him, someone else will. Especially teams named the Knicks or the Nets.

And I think it's becomming more likely. Kobe won't take 15. A team will offer him a 2 year 50 or 3 year 60 and he'll be Jordan with the Wizards. For a lot of loot. But it would take cap space. Or a sign n trade that could set up the Lakers future. Or maybe they just say F it and keep feeding him massive 1 year deals. There was a time when the Lakers gave Magic an unprecedented 20 million 20 year deal at the twilight of his career. 20 years ago that was crazy. Didn't Rashard Lewis make 20 mil in one season last year?

I love Kobe. But it may be in the interest of both the Lakers and him to part ways in two years.

 

[Knicks411]

I'm not totally sure, but could other teams offer him a huge deal like that? I can't imagine any team would have the cap space or want to offer him $25 million a year even if they had it.

He may be able to get a raise on his old salary; I am not sure if the CBA closed that loophole, so to speak. But I feel safe saying no one is going to offer him $20 million a year other than the Lakers, and i don't think they may either.

 

[cliftonparksufan]

But I feel safe saying no one is going to offer him $20 million a year other than the Lakers, and i don't think they may either.

Tell me you can't picture Dolan dolling out that much cash just to see Kobe light up Broadway.

 

[Knicks411]

Tell me you can't picture Dolan dolling out that much cash just to see Kobe light up Broadway.

Don't think it's possible; Kobe has 2 years left; Knicks have all their guys signed for the next 3 years.

But I really don't; $25 million is a ton of money; they just turned down paying Lin $15 million for one year because of the tax implications. Obviously Kobe is Kobe; but I don't see any team other than the Lakers paying $20 million a year, and I doubt they'll havr to do that, but they have his bird rights so they'll be able to; I really can't see any team tying up that much of their salary cap to a mid to late 30's year old Kobe. (I hope I'm not giving Dolan too much credit).

I'm also not 100% sure if it would be legal anyway; I don't know if another team can offer him a raise off his current salary or only the Lakers can. His current salary is way over the allowed max salary.

 

[alphaorange]

I'd be a little surprised if Kobe gets much after 2 more years. That guy has some serious miles on his body. Nash he is not.

 

[moqui]

They have a 3 billion dollar deal with Time Warner for the next 20 years. They can spend as much as they want.

do you really think they made that deal just so they could transfer the entire after tax take to their competitors?

 

[The General]

do you really think they made that deal just so they could transfer the entire after tax take to their competitors?

Their entire after tax take to the rest of the league? Really? First I should correct myself, it's actually a 4 billion dollar deal. 200 million a year according to Forbes which ranks the Lakers as the 35th most valuable global franchise. (All 32 NFL teams make the Top 50 list.)

And let's include sponsorship money and gamedays. It's a 900+ million dollar franchise. The Lakers print money.

Do I think they made that TV deal to give money to under the cap teams? No. I think they did it to make money. And expand their brand. And they will manage payroll accordingly to maximize results while minimizing penalty.

They don't care about paying the Bobcats and Cavs. They care about rings. That's why it's a great franchise to be a fan of. They have and always will pay the tax and make a huge profit. Top to bottom its one of the best run organizations in the history of professional sports.L

They face nominal penalties this year. Next year they will more than likely amnesty Artest and trade Pau. And the year after, Kobe's 30mil comes off the books. I think Mitch and Buss know what they are doing.