Boston Celtics v Los Angeles Lakers

Stricter luxury tax penalties in new CBA could actually help big market teams


The NBA’s lockout prior to the 2011-12 season was certainly all about money, and how the owners could channel more of the league’s revenue into their pockets instead of those of the players.

But it was also about putting a system in place that would, in theory, make it more difficult for the teams in the largest markets to simply spend their way to a title.

While the new, harsher luxury tax penalties put into place make it severely punitive financially to go out and exceed the tax threshold season after season, there is a loophole that exists which works to the advantage of the large market teams in the long run, while working against their small-market counterparts.

From Larry Coon at HoopsWorld:

The first year of the repeater tax (2015) will only apply to teams that were also taxpayers in the three previous seasons — 2011-12 through 2013-14. So right now, only Boston and the Lakers are candidates. The Celtics will probably stay out of the tax this season, and the Lakers are clearing the books next summer. So I don’t think any team will be a repeater in 2015.

Starting in 2016 a team is a repeater if they were taxpayers in any three of the previous four seasons (for 2016 that’d be 2011-12 through 2014-15). That means any team that was a taxpayer in either 2012 or 2013 would be a repeater if they are a taxpayer in both 2014 and 2015. Most teams will be able to avoid the repeater penalty. A few teams like Brooklyn probably won’t care.

The system is set up — well, “set up” is probably a bad way to put it. I don’t think they did it intentionally — so that two years out of the tax buys you three years IN the tax without being a repeater. I think many teams will adopt this strategy.

That last part is the key.

Take a team like the Celtics, for instance, who had no problem committing to payroll that would put them over the tax threshold when they were trying to contend for a title over the last few seasons. They’re rebuilding this year and next at minimum, but after those two years out of the tax, they could add free agents and load up for another run at a title by spending whatever it costs for the next three seasons, all the while avoiding the dreaded repeater tax.

There are very few teams that won’t try to implement this strategy. This summer, we saw the Heat use the amnesty provision to waive Mike Miller, even after he was a part of winning back-to-back titles, because the move saved them a total of $17 million in salary and luxury tax costs. And we saw the Lakers make a similar move to cut costs when they waived Metta World Peace.

The Nets are one club that doesn’t seem to care about dollars, but they’re certainly in the minority. Most large market teams will use payroll to chase championships when the talent on the roster dictates it. Small market teams, wary of even the more basic tax threshold, still won’t be able to meet that standard.

Report: Rockets will try to sign Alessandro Gentile next summer

Alessandro Gentile, Paulius Jankunas
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The Rockets tried signing Sergio Llull this summer, but he opted for a long-term extension with Real Madrid.

So, they’ll just turn to another player in their large chest of stashed draft picks – Alessandro Gentile.

Marc Stein of ESPN:

Gentile, who was selected No. 53 in the 2014, is a 22-year-old wing for Armani Milano. He’s a good scorer, but he primarily works from mid-range – an area the Rockets eschew. He can get to the rim in Europe, but his subpar athleticism might hinder him in the NBA.

If Gentile comes stateside, he’ll face a steep learning curve. But he’s young enough and talented enough that he could develop into a rotation player.

Report: Hawks co-owner made more money by exposing Danny Ferry’s Luol Deng comments

Michael Gearon, Bruce Levenson
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A terribly kept secret: Hawks co-owner Michael Gearon Jr. wanted to get rid of general manager Danny Ferry.

Many believe that’s why Gearon made such a big deal about Ferry’s pejorative “African” comment about Luol Deng – that Gearon was more concerned about ousting Ferry than showing real concern over racism.

Gearon had another, no less sinister, reason to raise concern over Ferry’s remarks.

Kevin Arnovitz and Brian Windhorst of ESPN:

While Gearon felt that Ferry, as he wrote in the June 2014 email to Levenson, “put the entire franchise in jeopardy,” Gearon also figured to benefit financially from a Sterling-esque fallout.

In the spring of 2014, Gearon was in the process of selling more of his interest in the team to Levenson and the partners he had sold to in September. The agreed-upon price for roughly a third of Gearon’s remaining shares valued the Hawks at approximately $450 million, according to reports from sources.

“We accept your offer to buy the remaining 31 million,” Gearon wrote in an email to Levenson on April 17, 2014. “Let me know next steps so we can keep this simple as you suggested without a bunch of lawyers and bankers.”

Approximately five weeks later — just a little more than a week before the fateful conference call — Steve Ballmer agreed to pay $2 billion for the Clippers, a record-smashing price that completely changed the assessed value of NBA franchises. Gearon firmly maintains he was acting out of the sincerity of his convictions to safeguard the franchise from the Sterling stench, but such a spectacle also allowed him to wiggle out of selling his shares at far below market value.

Gearon and his legal team later challenged the notion that the sell-down was bound by any sort of contractual obligation and that any papers were signed. Once the organization became involved in the investigation, the sale of the shares was postponed.

Arnovitz and Windhorst did an incredible amount of reporting here. I suggest you read the full piece, which includes much more background on the Gearon-Ferry rift.

Considering the Hawks sold for $850 million, Gearon definitely made more money than if he’d sold his shares at a $450 million valuation.

Did that motivate him? Probably, though it doesn’t have to be one or the other. Most likely, his actions were derived from at least three desires – making more money, ousting Ferry and combating racism. Parsing how much each contributed is much more difficult.

What Ferry said was racist, whether or not he was looking at more racism on the sheet of paper in front of him. His comments deserved punishment.

But if Gearon didn’t have incentive to use them for his own benefit, would we even know about them? How many other teams, with more functional front offices, would have kept similar remarks under wraps or just ignored them?