So, how does Fertitta explain his view on the luxury tax now?
Kelly Iko of The Athletic:
It’s a horrible hindrance.
And if any of y’all ever want to really understand it, go do the math on it. I mean, it’s just brutal. You can take 5 million, and all of a sudden you look up, and it costs you 20 million.
And at some point, you have to be smart, and you cannot get into the repeater tax, which happens if you’ve been in the luxury tax three years in a row. And that’s something to really look at. And at some point, you have to do some things so you never go in the repeater tax. You’re just dead in the water, and it can ruin your franchise for years. So, it’s something you have to be cognizant of.
At the same time, a team is built is on superstars. If you have your top four or five players, you can always see other players move in and out.
Because it is a chess game playing with the luxury tax. That’s why there’s only three or teams in it.
This year, to be able to make sure that we hopefully get back to the Western Conference finals, we were going to have to be in it around many millions of dollars. And I am here to win championships, and I’m not going to let 5 or 10 or 15 or 20 million dollars make a difference. Because if you do win the championship, that’s easy money back.
Now, if we’re in the luxury tax every year and we’re barely getting into the playoffs and a first-round game is a struggle, then I’m going to go find me a new general manger.
Let’s be clear: Fertitta will spend a significant amount on the Rockets this season. They’re over the luxury-tax line and will very likely remain there once the tax is assessed on the final day of the regular season. Fertitta greenlit one of the league’s largest payrolls.
But his arguments about the repeater rate are lacking.
Teams pay the repeater rate when paying the tax for at least the fourth time five seasons. It doesn’t matter how far over the tax they were in those prior seasons. So, while Houston – which has a completely clean repeater clock – wants to avoid paying the repeater rate down the road, incremental savings this season won’t matter for that. Unless the Rockets avoid the tax completely, which is highly unlikely, this season will count as a tax-paying season.
Houston’s key losses – Trevor Ariza and Luc Mbah a Moute – left for one-year contracts elsewhere. Keeping them would have been expensive this year, but they would have triggered no additional costs later.
Again, re-signing those forwards would have pushed the Rockets’ payroll extremely high. It might be reasonable for Fertitta to place his spending limits where he did. But it should have nothing to do with the repeater tax.
It’s OK if Fertitta doesn’t know the exact ins and outs of the luxury tax. Rockets general manager Daryl Morey does and handles it. But the degree to which Fertitta is willing to pay the tax is so important to Houston’s title chances, it’s worth assessing everything he says about it.
“Horrible hindrance” and “just brutal” speak loudly.