The 2021-22 season will have the largest luxury tax payments ever

The 2021-22 season will have the largest luxury tax payments ever

NBA Salaries

The 2021-22 season will have the largest luxury tax payments ever

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The NBA is set to collect more money this season from taxpaying teams than any time before. As of now, there are 10 teams over the luxury tax threshold but three of them – Boston, Portland, and Toronto – are barely above it and can easily get below it before the season ends. The remaining seven teams – Brooklyn, Golden State, Los Angeles Clippers, Los Angeles Lakers, Milwaukee, Philadelphia and Utah – are well over the luxury tax and are currently combining for $544 million in payments.

NBA Luxury Tax Payments By Season by Albert Nahmad (HeatHoops.com)

NBA Luxury Tax Payments By Season by Albert Nahmad (HeatHoops.com)

While this figure could decline as we get closer to the trade deadline, this season’s distribution dwarfs the next highest in NBA history and it’s not close. According to capologist Albert Nahmad, the founder of HeatHoops.com who monitors the league’s luxury tax payments each season, the previous highest luxury tax season was its first in 2002-03 with $173.3 million.

If these seven teams don’t reduce their payroll significantly, the 23 teams under the luxury tax will receive $11.9 million each from the luxury tax distribution.

Golden State Warriors

2021-22 Payroll: $177.9 million

2021-22 Luxury Tax Payment: $184 million

2021-22 Combined Payroll and Luxury Tax Payment: $362 million

Golden State’s payroll is just as high as Brooklyn’s but their luxury tax bill is over $50 million more because they are in the repeater tax. The Warriors earned repeater status because they were taxpayers in three of the last four seasons (2017-18, 2018-19, and 2020-21). The Warriors are very likely to be in the luxury tax over the next four seasons now that they have extended Stephen Curry. If the Warriors remain committed to their core players and paying them top-dollar on Curry’s timeline, they could end up paying close to $2 billion in combined payroll and luxury tax payments through 2025-26.

The Warriors currently have 16 players on their roster so their luxury tax payment will go down just by getting off one of their minimum players. For example, waiving Mychal Mulder and signing him to a two-way deal will save them $14 million. Still, no team has ever spent close to $350 million on their roster.

Brooklyn Nets

2021-22 Payroll: $175.8 million

2021-22 Luxury Tax Payment: $130.6 million

2021-22 Combined Payroll and Luxury Tax Payment: $306.4 million

Unlike Golden State, Brooklyn isn’t burdened with the increased tax rates of being a repeat taxpayer. That designation will likely start in the 2023-24 season after three consecutive seasons presumably being in the luxury tax. Kevin Durant recently extended for four years, $198 million and both James Harden and Kyrie Irving are eligible to sign maximum extensions as well. If both get their maximum amounts, all three All-Stars would earn at least $50 million in 2025-26. It will be fascinating to see what their luxury tax payment would be if the Nets still have all three players by then, especially since they’ll be repeaters.

Los Angeles Clippers

2021-22 Payroll: $168.8 million

2021-22 Luxury Tax Payment: $95.4 million

2021-22 Combined Payroll and Luxury Tax Payment: $264.1 million

The Clippers were set to join the ‘$300 million in combined payroll and luxury tax payments’ club alongside Golden State and Brooklyn prior to the Eric Bledsoe trade. It’s understandable why they decided to reduce their expenses by $30 million since they might not be a title contender with Kawhi Leonard likely out for the season. Provided the team is healthy, don’t expect the Clippers to hold back on spending in future seasons.

Milwaukee Bucks

2021-22 Payroll: $158.6 million

2021-22 Luxury Tax Payment: $53.7 million

2021-22 Combined Payroll and Luxury Tax Payment: $212.3 million

Milwaukee has no excuse to hold back on spending having just won a championship. Their ascent towards a roster costing north of $200 million is largely thanks to the extensions of Giannis Antetokounmpo and Jrue Holiday kicking in. Despite losing PJ Tucker, the Bucks invested a good amount of money re-signing Bobby Portis and bringing in Grayson Allen and George Hill. Matching Tucker’s $7 million salary would’ve added an additional $29 million towards the luxury tax.

Utah Jazz

2021-22 Payroll: $154.7 million

2021-22 Luxury Tax Payment: $38.9 million

2021-22 Combined Payroll and Luxury Tax Payment: $193.6 million

Utah did their best to reduce their luxury tax payment to accommodate Mike Conley’s new contract. Instead of paying Derrick Favors $9.7 million this year, they offloaded him and divided $9.3 million among Rudy Gay, Eric Paschall, and Hassan Whiteside. Utah has created one of the most cost-effective rosters among contending taxpayers.

Los Angeles Lakers

2021-22 Payroll: $153 million

2021-22 Luxury Tax Payment: $33.1 million

2021-22 Combined Payroll and Luxury Tax Payment: $186.1 million

The Lakers currently have 12 players on their roster so their payroll and luxury tax payment will increase once they get to the 14 player requirement. Signing two players to veteran minimum salaries will increase their luxury tax payment to $44 million. The decision to let Alex Caruso walk was met with a lot of disapproval from the fans. While teams will never get sympathy for holding back on spending, matching his $8.6 million salary for this season would cost an additional $34 million in combined payroll and luxury tax payments on a 14-player roster.

Philadelphia 76ers

Joel Embiid, Philadelphia 76ers

2021-22 Payroll: $142 million

2021-22 Luxury Tax Payment: $8.2 million

2021-22 Combined Payroll and Luxury Tax Payment: $150.2 million

The Sixers are probably paying the right amount of money for a team that got eliminated from the playoffs in as painful a fashion as they were. It is no secret that they are looking to move on from Ben Simmons for a star such as Damian Lillard. Such a trade could require them to take on even more salary, potentially putting their expenses on par with the Jazz and Lakers.

2020-21 Luxury Tax Adjustments

The 2020-21 season would’ve topped the 2002-03 season but taxpaying teams received significant relief.  All 7 teams projected to finish over the luxury tax this season were taxpayers last season and had their total over the threshold reduced by 28.94 percent, per league sources. Their unadjusted luxury tax payments would’ve totaled $269.2 million in a normal season. Instead, these teams will pay $160 million in luxury tax payments. This will pay out the remaining 23 non-taxpaying teams $3.5 million each from the distribution.

Golden State Warriors

2020-21 Unadjusted Luxury Tax Payment: $118.7 million

2020-21 Adjusted Luxury Tax Payment: $68.9 million

Brooklyn Nets

2020-21 Unadjusted Luxury Tax Payment: $105.8 million

2020-21 Adjusted Luxury Tax Payment: $61.6 million

Philadelphia 76ers

2020-21 Unadjusted Luxury Tax Payment: $25.1 million

2020-21 Adjusted Luxury Tax Payment: $15.6 million

Los Angeles Clippers

2020-21 Unadjusted Luxury Tax Payment: $7.2 million

2020-21 Adjusted Luxury Tax Payment: $5.1 million

Los Angeles Lakers

2020-21 Unadjusted Luxury Tax Payment: $5.7 million

2020-21 Adjusted Luxury Tax Payment: $4 million

Utah Jazz

2020-21 Unadjusted Luxury Tax Payment: $5.5 million

2020-21 Adjusted Luxury Tax Payment: $3.9 million

Milwaukee Bucks

2020-21 Unadjusted Luxury Tax Payment: $1.2 million

2020-21 Adjusted Luxury Tax Payment: $848,000

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