Further Implications
Even if all of the above made your eyes blur. here are five critical implications of the Nurkic signing that you need to know.
- Taking on new players will get exorbitantly expensive now. The next $3.1 million in salary Portland pays will incur a tax penalty of $1.75 dollars per dollar spent. That’s $5.4 million additional for that $3.1 million contract...a total cost of $8.5 million. For every dollar over $3.1 million, the penalty goes up. Example: if the Blazers use their TPE to trade for a player making $10 million, they’ll pay $28.9 million in salary and penalties on that contract. Don’t hold your breath.
- With Nurkic on board, Portland’s salary obligation in the Summer of 2020 rises to $87.3 million against a projected salary cap of $116 million. The catch: that number accounts for only five Blazers under contract. On paper they’ll have a little less than $29 million to play with that summer, but factor in minimum-salary cap holds and the available space dwindles to somewhere around $22 million. To use that amount on a single player, they’d need to carry eight minimum-contract players on the roster. They’d also need to refrain from making any cap-significant signings or trades between now and 2020. Again, don’t hold your breath.
- Not only does crossing the tax threshold incur a penalty, it removes a financial reward for the franchise. Luxury Tax dollars are redistributed among all non-tax-paying teams. If ten teams end up paying $100 million total in tax penalties, the other 20 franchises get $5 million each. That’s a relatively small amount per team, but it increases the actual cost of staying over the tax. This is important because...
- Tabulation of salaries for luxury tax purposes are not made until the end of the season. A team can start the year over the tax line without paying an extra dime. Where they end the year determines whether they’re a taxpayer or tax receiver. Re-signing Nurkic incurs no penalty for Portland now. If they do not reduce their salary obligation by the end of the year, they will pay tax penalties and lose out on the tax windfall.
- Right now the Blazers are approximately $6.9 million over the tax threshold. Al-Farouq Aminu makes just over $6.9 million and will become an unrestricted free agent at the end of the year. If the Blazers want to stay under the tax line and they cannot trade away a higher-salary player to do so, trading away Aminu for a second-round pick and/or cash would accomplish that.
The decision to pick up Wade Baldwin or another 15th man will be the first indication of Portland’s immediate direction. If they decide against keeping Baldwin or taking on a 15th contract, the reason may be financial.
