This board has been home to a lot of rancor over how infrequently the Bulls have paid the luxury tax (LT). Historically, it's true that few NBA franchises have paid the LT as infrequently (once) as the Bulls. However, no NBA team has made LT payments every season since the tax was introduced (2002-03), so what makes a team decide to pay the LT? Since the LT came into being, 6 teams have won the NBA Championship...Boston, Dallas, Detroit, Lakers (2), Miami (3) and San Antonio (4). So, how have they handled the LT? Boston Boston paid the LT for the first time in 2004 and I suspect that they weren't happy about it since they finished with a 36-46 record and paid Vin Baker $13.5mil and Raef LaFrentz $8.2mil. They seemed to learn their lesson and didn't pay the LT again until 2008 when they added the dynamic duo of Kevin Garnett and Ray Allen to their own Paul Pierce and won the NBA championship. They continued to pay the LT each season since then while their on-court product declined until this past 2013-14 season. Still they got their 'ship and it's fair to say that they kinda bought it. Dallas Dallas owner, Mark Cuban is hard to ignore. He's become sort of the designated representative of the crazy-spending NBA owner. He deserves it...the Mavs paid the LT every season from 2003 thru 2012. He finally got his title in 2011 and frankly, no one thought it was going to happen...the Heat and the Spurs were the heavy favorites. After their title season, the Mavs disassembled their team in a surprisingly financially-responsible way. Cuban just keeps surprising. Detroit The Pistons have only paid the LT once, they only paid about $750K in tax and they made it work to the tune of the NBA championship...nice. In fact, they would have a clean LT slate and undoubtedly still have their championship if they hadn't paid the great Bobby Sura (3.8ppg and 1.7apg) $6.3mil that season. Lakers The Lakers have paid the LT in all but 2 seasons since the tax's inception. The first two times were largely due to Shaq's $20mil+ salary though the Lakers didn't win the title in either of those seasons. They then had 2 years off the tax before acquiring Pau Gasol for Kwame Brown's expiring contract and draft picks (what a deal) put them over the line again. They won two titles and going into the 2014-15 seaon are not only not going to be a taxpayer, but are currently under the salary cap. Miami Miami was one of the taxpayers in the tax's inaugural season (2002-03) by paying Alonzo Mourning over $20mil and pretty damn average SG/SF Eddie Jones and PF/C Brian Grant $11mil+ each...pretty dumb since the team went 25-57. They didn't pay the tax again until 2007-08 but they f'ed it up again, finishing 15-67. They paid the tax again in 09-10 by paying Jermaine O'Neal $23mil (what the hell were they thinking?). Then of course, they assembled the Three Amigos of Wade, James and Bosh, paid the tax and won a couple titles. San Antonio San Antonio also paid the tax in the tax's first year (but only $187k) because they still had David Robinson on the roster. They paid it again in 2005-06 when Tony Parker came off his rookie scale contract and the trio of Duncan-Ginobili and Parker were all being paid full freight. Ironically, the Spurs' highest tax payment ($8.8mil) occurred when they tried to buy a championship by acquiring SF Richard Jefferson ($14.2mil) in 2009-10. Not only did the Spurs not win the title that season, they had their worst winning % of the Duncan era. I found the research I did for this post interesting because I don't think there's any lesson to be learned. Pay the tax and it may win you a title...or it may be just pissing millions away. How does this apply to our beloved Bulls? Well, the Bulls paid the tax in 2012-13 because Rose jumped from $7mil to $16.4mil. The team's tax burden that year could have been much higher if RFA Omer Asik had accepted the Bulls reported 4-year 21mil offer. It's ironic that, due to Rose's injury situation, the one year that the team paid the LT was a year when the team had pretty much no chance at a championship. While some may disagree, the fact that the Bulls paid the tax in 2012-13 should effectively debunk the "Bulls will never pay the tax" talk...they'll pay the tax to keep what they consider a contender together.
Which of those 6 teams never paid the luxury tax in history? When I look at WWW sites like Deeks' that have salary data, they don't show just this season, but a forecast a few seasons out. As a businessman, I made similar projections, 3 and 5 year. I'd be stunned if the business that has the distraction of a basketball team that is the Bulls doesn't forecast as well. Or all the other NBA teams. Like, "if we pay the tax this year, we get to keep player X, and in 2 years, we'll be under the tax." So... The Spurs paid the tax 5 times and won how many championships? They wouldn't have won ANY if they paid no tax - no other team paying no tax has. How about them Lakers? How many finals' appearances? But carry on. I'm sure a certain someone will come along and pretend I'm making some entirely different argument.
Nobody is saying that having a high payroll is a guarantee of anything. Having a medium to low payroll, especially if you are an organization that is basically dead set in being a medium to low payroll team isn't much of a recipe for being a NBA Champion. How many teams on the Deeks spreadsheet have won a title with 0 years or 1 year of paying the tax? Looks like its the "Pistons" model yet again for the beloved Bulls. We all remember how supposedly following that model turned out. Like you said, the NBA champion teams don't always succeed when they decide to be high payroll. But they all succeeded at somepoint. Must be nice to have your team win a title, its been a long 17 years. I guess we'll just have to wait for the GOAT again.
Sorry, I really was just reporting on stuff I found on an afternoon when I had an hour or so to look at some history. If you didn't find it as interesting as I did, oh well.
What the hell were the Heat thinking when they traded for J O'Neal? That he was a $22M expiring contract. The following season, they signed LeBron, Wade, and Bosh. But they paid the tax to get them into that position. They paid the tax.
My general take on this thing is that it's clear that in order to keep a championship calibre nucleus together you're going to have to pay the tax. Unless you capture lightning in a bottle like San Antonio did when they got to have a superstar in year 1 of his rookie contract. Of course they eventually had to start paying the tax. So it's no accident that championship winning teams are usually tax payers. But the opposite is not true: Ie, paying the tax won't guarantee that you're going to be a contender. The Knicks, Nets, and some versions of the Lakers are proof of that. So basically a willingness or unwillingness to pay the tax should only be judged in the context of what players are on the team. Paying the tax can be smart just as easily as it can be stupid. If you're a contender or on the threshold then it's a good idea to go ahead and go over it if it improves the team. If you're not there yet then you're not doing yourself any favors by spending more and paying the tax should be a bug, and not a feature of management. So to me, pointing out how often a team did or didn't pay the tax is a hollow observation. It means nothing without context. Obviously paying the tax for those championship teams was a good idea. It's also a defensible idea if your team is really, really good but just hasn't had the balls bounce their way. I think it was a good idea for the Bulls to pay the tax when they did. The idea was that they wanted to give the core another chance to prove itself when Derrick was healthy. I also think it was a good idea for them not to pay the tax last year since it would've affected their ability to go into the tax in later years when Derrick was healthy, and that roster had enough uncertainty about it that being a contender again seemed very uncertain. But it was a bad idea for for the Thunder not to go into the tax when they traded James Harden. I don't have the stomach to go over all that's been argued these past couple weeks but that's my $0.02
That's was my first thought when I saw the chart. If you're the Thunder, and you've never paid the tax, how can you let the third pillar of a contender walk? But here's the thing -- at least the Thunder got Steve Adams in return. That guy can ball. The Bulls didn't get anything in return for Asik when they refused to provide him with an offer. And the Rockets were able to flip his contract, after the cheap years were gone, for a Pelicans first round pick. There's a decent chance that that's a mid-lottery pick before it's all said and done with how stacked the West is. That'd be nice now, wouldn't it? So we should take this out of the clouds. The Bulls let an asset walk for nothing when they didn't reup Asik, and there more than profitable enough to make the argument that, as a business decision, it would have made sense to retain Asik. That's just bad ownership work.
The critics of the Bulls organization, say the Bulls spend like a small market team. Here's Thonus, for example: http://www.chicagonow.com/chicago-b...7/how-does-a-small-market-team-win-the-title/ The Heat are a small market team, FWIW. So it really matters who the owner is, and whether they have the money (Reinsdorf/Bulls clearly do) and whether they care about they team (aha, that's the question).
Rosenthal, thanks for your thoughtful comments. I agree with most of what you wrote. As for the rest, it's never been as clear to me that agendas rather than an exchange of ideas is what things are about here. No sense expending much effort here.
Looking at your work some more. Sura was a $6M expiring contract that they traded for. The Lakers built two championship teams: Kobe/Shaq and then Kobe/Gasol in the years since the breakup of the Bulls dynasty. Five championships and two more finals appearances. What a great place this would be if we all just agreed. We'd be posting "Woot! Bulls just traded Tyson Chandler for PJ Brown!"
Exactly. The Spurs not only didn't pay the LT this season, they were more than $8 million below the LT threshold. And 2 of the 5 LT paying teams this season didn't even make the playoffs. Only 23 of 44 teams that made the Conference Finals paid the tax. The 11 NBA champs in the LT era have been: 2 teams that didn't pay the tax 3 teams that were over the LT threshold by less than $1 million: '03 Spurs $197k '04 Pistons $757k '07 Spurs $196k
Agreed, rosenthal made several outstanding points. I would just say that you need to add "moving goal posts" to agendas. And it's not just here, it's on RealGM, and many blog commenting areas as well. "The Bulls will never pay the LT.' When they did, the goal posts just slid over a bit. It's as if nobody ever said that before, anywhere, anytime. "The Bulls will never amnesty Boozer and pay all that money for him to be on another team's roster." When they did, the goal posts just slid over a bit. It's as if nobody ever said that before, anywhere, anytime.
I admit I was wrong about boozer and amnesty. I just didn't see the angle. It is about profit after all. The joke is on you. The joke was on me, too, until I got it. The Bulls pay $77M in salaries on the P&L with or without Boozer. So there's no hit to the bottom line. Profit is safe and secure after all!
Fair enough. I think the Asik deal is the biggest blemish management has on its hands. It was a judgment call, but hindsight has shown that it was a reasonable, movable contract that could have been traded fairly easily if they really wanted to. Asik is really big and really good on defense.....those guys are usually worth something. So we probably let a good draft pick slip through our hands, which is lost opportunity. IIRC, the poison pill contract that Asik signed could not be completed via a sign and trade, so the literal deal you're referencing doesn't translate, but the fact that he was recently moved for a pretty good haul proves your point all the same. When push came to shove the Bulls were looking down the barrel of a gun with that 3rd year and they blinked out of fear of financial armageddon that, with the Rockets at least, never came to pass.
You'd think in year 2 of Asik's contract that some contender would be willing to pay the $15M final year for the privilege of having him help the team for $5M. Someone like the Mavericks.
Really though, what was the potential financial Armageddon? We already knew Asik was good. We already knew that he played really well in Thibs system. A large contract in its last year is oftentimes an asset in a trade, even if things went south. From a basketball standpoint, how would the Bulls have been specifically hurt? Just perhaps the punitive restrictions for movement and exception flexibility under the CBA if you are over the apron, right? From a financial standpoint, sure, tax payments / potential repeater penalties, but the Bulls are one of the richest teams in the league.
Deeks talks about the luxury tax, repeater tax, and the Bulls' situation here: http://www.sbnation.com/2013/11/21/5126774/nba-luxury-tax-2013-repeater-chicago-bulls Chicago is due to pay luxury tax again this season. The Bulls are currently $7,540,428 over the threshold and are not likely at all to get under it. This, then, puts them in line for the repeater rates should they pay luxury tax again in either of the next two seasons. The Bulls' projected total expenditure this season after tax is due to be $91,234,177. The same payroll with the same hypothetical tax threshold, when subject to repeater tax, would result in a total expenditure of $98,774,605. ... (Before the salary dump of Deng). At $98M, the team profit would be in the $30M-$35M range. Sacrificing some profit to retain an all-star and all-defense caliber player makes basketball sense, but not profit sense. There's another penalty for being > $4M over the tax threshold. The team cannot receive a player via S&T. This is rather significant, tho at $7.5M over, they could make any other trade where salaries match. They could have dealt for McBuckets, no problem. They wouldn't have the full MLE to have signed Mirotic this summer.
Interesting that Deeks phrased it Interesting that the Bulls opted to lose both pieces. Deng e They could have just amnestied Boozer, signed Deng for say, 4 years 11 per (would have been the best offer) and had Mirotic at the MLE (since that's what he basically signed for), right? And they would be still under the tax line for this season, even though they could afford to pay some tax every season if they chose to. Also interesting is this quote. These are my thoughts on the situation as well, given the SELF-IMPOSED payroll restriction. Once again, Uncle Jerry is of course totally within his rights to run his business as he sees fit, but people could at least be honest and call the situation for what it is, just like Deeks does in his article. --- The Bulls current payroll is 65.5 million. The tax threshold is 76.8 million. Like you said, looks like the payroll plus what they will have pay Boozer plus a packed arena (with raised ticket prices this year) will keep the Profits! at their usual level, if not higher.
