The next two-and-a-half weeks are going to be like a Transformers movie: A loud, confusing mess that will very much leave you disappointed at the end.
The setup is obvious. Danny Ainge and the Boston Celtics are armed with a $28.5 million traded player exception (TPE), the largest in NBA history. It’s essentially a coupon to make a trade, which his team really could use to get some help and maybe shake the roster in to making a little more sense. Because of that, every rumor in the world will somehow drag the Celtics into the conversation, and those rumors will get louder and more frequent the closer we get to March 25.
This will leave people expecting Ainge to do this
[embed]https://www.youtube.com/watch?v=ndVhgq1yHdA[/embed]
When it’s much more likely that he’s going to do this
[embed]https://www.youtube.com/watch?v=Th8lAinJSzo[/embed]
It’s important for you to understand what the actual situation is and what the team’s motivations might really be so you can properly prepare yourself for what’s about to happen.
We have to start with a look at Boston’s financial situation.
Current payroll: $116,911,259
Luxury tax line: $132,627,000 ($15,715,741 difference)
Hard cap line: $138,928,000 ($22,016,741 difference)
The Celtics are hard capped for this year because they gave the full mid-level exception to Tristan Thompson. That means they cannot cross the hard cap line at any point this season.
You may have heard all of this mentioned in relation to the TPE. Boston can’t just go “get” someone making $28.5 million.
The obvious follow-up question is “why would Ainge hard-cap his team this season if he knew the best he could do with the trade exception was only use part of it?”
It’s hard to know what all of Ainge’s contingency plans are, but there is one possibility that isn’t being discussed very much right now.
What if Ainge was willing to hard cap the Celtics because he didn’t care about hard capping the Celtics? What if Ainge’s true cap this season is the luxury tax line, not the hard cap line?
A Taxing Situation
Wyc Grousbeck, Governor, Managing Partner and CEO of the Celtics, was recently asked about being a taxpayer in an appearance on 98.5 the Sports Hub.
“We have been, and you'll see it again. We were going to be this year until the pandemic and everything else changed things,” he said. “But we're a consistent taxpayer and a consistent, would-be, in our own minds, contenders. That's the way we want to run the team and we want to get back to that status as soon as we can.”
Grousbeck has been consistent with his stance on the tax: We’ll pay it when our team is a contender. We won’t, if we can avoid it, when we’re not. By saying “we want to get back to that status as soon as we can,” he’s admitting that they’re not there right now.
That’s not a secret. I think we can all admit that we see the same thing.
So there’s a real motivation to stay below the tax line this season, but it’s not just about saving the ownership group a few bucks this year. It’s about saving them a lot of money down the line.
Repeat After Me
The reason Ainge is likely operating with a mandate to stay below the tax line is something called the “repeater tax.” If you’ve never heard of it, here’s how it works in a nutshell:
Teams that have paid the luxury tax in three out of four years are put into a different category of taxpayers. They are “repeaters,” and subject to a tax that’s about 67% higher than the standard tax.
The standard tax rate starts at $1.50 for every dollar over the tax. Every $5 million a team is over the tax, the rate jumps up. So the second $5 million is taxed at a rate of $1.75, the next $5 million is taxed at $2.50, and so on.
The repeater rate is a dollar higher at every tier (so $2.50, $2.75, $3.50, etc).
So a taxpaying team $20 million over the line pays an additional $45 million in taxes. A repeater team $20 million over the line pays $65 million.
(CBA guru Larry Coon has written the bible on the NBA’s Collective Bargaining Agreement. He has a detailed breakdown of the tax here if you’re interested in learning more)
Jayson Tatum’s extension begins next year, which means they are guaranteed to be a taxpayer. They were not a taxpayer last year, but they were the year before. By avoiding the tax this season, they reset the repeater clock by not paying two years in a row, meaning the earliest they’d be in that category would be the 2024-25 season.
If they do pay this year, it would be the second time in three years, making next year the third year and the 2022-23 season the first repeater year. That’s two extra seasons of paying the repeater tax.
So that leads us to this question: Is it worth chasing a salary now that would trigger the repeater tax in the middle of the Jaylen Brown/Jayson Tatum run, or is it better to wait until Brown’s contract is up and the Celtics can assess where they actually stand?
The answer is obvious. It’s not worth it to make some wild stab at a player who might not even get the Celtics to the NBA Finals. So you can forget any rumblings about Nikola Vucevic and his $26 million. You might even want to forget, at least for now, any real pursuit of Harrison Barnes and his $22.2 million.
OK, So Now What?
This doesn’t mean the Celtics just sit back and do nothing. In fact, this brings us back to the Thompson signing.
By giving Thompson the full mid-level exception, Ainge added a $9.25 million salary into his bag that can be used to aggregate salaries. This means two things:
- The Celtics can pull off a helpful move without touching their TPE
- They won’t need Marcus Smart as a salary-match