As one NBA agent states, “What people don’t understand is that there are so many layers to any contract – let alone a maximum contract”. With any decision, it is imperative that the NBA player does his due diligence before making a decision that will impact their life forever. It is important to delve into the layers of a max contract and understand that not all max contracts are negotiated the same. For example, a player’s years of experience in the NBA is factored into how much of a percentage that a player can take of the team’s salary cap. A player with 0-6 years of experience can only make up 25 percent of the salary cap. A player with 7 to 9 years can take up 30 percent and a player with 10+ years can make up 35 percent of the salary cap. Additionally, there are “bird rights” which are salary cap exceptions that allow a player to earn more money and sign for a longer deal if the player chooses to stay with their current team.
As NBA players weigh their options, the market of the team plays a very pivotal role. In LeBron’s case, signing with the Lakers opens the doors to endless off-the-court opportunities including Hollywood acting and producing roles, additional endorsement deals and a massive fan base. Financially speaking, teams in Texas and Florida have an advantage because there is no state income tax. From an NBA executive’s perspective, it is quite terrifying that teenagers are signing $100 million deals plus massive endorsement deals without playing in a single NBA game yet. A former GM animatedly states, “If you’ve never won, how am I supposed to know that you’re ever going to covet winning? When a high-profile rookie joins a bad team, they are given a nice salary and shoe deal from day one and they’re handed a starting role. They never have to earn anything”. Although an NBA team cannot guarantee if a rookie will win championships, there can be injury provisions negotiated if a top prospect has a history of injuries. For example, the Philadelphia 76ers and Joel Embiid agreed to a five-year, $148 million deal. However, due to Embiid’s history of foot and back injuries, an injury provision was negotiated. This gave Philly the option of waiving or saving money if Embiid reinjured himself and missed at least 25 games or played less than 1,650 minutes in a season.
So, how does Fertitta explain his view on the luxury tax now? Kelly Iko of The Athletic. Fertitta: “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.”
Chicago cut bait on the Butler era. The Kings wanted no part of a supermax for DeMarcus Cousins. Some within the Pacers had qualms about a supermax for Paul George, sources say — a dilemma that never came to pass, since George did not make an All-NBA team in 2017 before Indiana traded him. The Clippers re-signed Blake Griffin, then 28 and their first homegrown star in decades, to a regular 30 percent max — and traded him at the first opportunity for Tobias Harris, Avery Bradley on an expiring contract and a pick at the back of the lottery. We hailed it as a victory for LA.
Shifting this calculus backward on the age curve onto players in their late 20s makes me feel a little icky. The ickiness started to set in when the Bulls dealt Butler. Several executives around the league chuckled at my discomfort, suggesting I was naïve. These choices were just a product of teams getting smarter about injuries, aging, probabilities, and what it takes to win championships, they said. If you are going to re-sign Butler on a supermax, they told me, you have to know you will have enough championship equity (if that is a team’s measuring stick — a crucial and evolving factor) on the front end of the deal to justify the pain coming on the back end. Chicago didn’t. They started the cycle over instead of delaying a rebuild.
The league and union could do away with a seniority-based wage scale, so that pay would more accurately reflect production. The league has broached tweaks in past collective bargaining cycles, sources say, but it has been a non-starter. The union will obviously not accept a system in which max contracts decline as players age.
Regarding cap smoothing, Jared Dudley on the Woj podcast: “Michele Roberts is obviously a smart woman. She probably gauged both it ways. She probably talked about it. But, yeah, anytime the league comes to us – or vice versa. If we came to the league about something, they’ll fight back first and then they might let it go through.”