21 July 2023
If the Nets are going to add a player to this roster as-is, that deal is probably going to come in at less than $10 million in annual salary.
Welcome to the 2023 NBA offseason, where the Nets find themselves as repeat tax offenders after three seasons chasing championships with Kevin Durant and Kyrie Irving on the payroll.
And with a projected $155.4 million in guaranteed salaries for the 2023-24 season, the Nets don’t have much wiggle room before incurring stiff luxury tax penalties.
The Nets were tax payers in 2020, 2021 and 2022, triggering the repeater tax for teams whose payroll skyrocketed above the tax threshold in three of the last four seasons.
Traditionally, the luxury tax penalizes teams $1.50 for every dollar spent over the tax line, with that tax amount increasing every $5 million spent over the tax line.
As repeat tax offenders, however, the Nets would be paying $2.50 on the dollar for any transaction that takes them up to $5 million over the tax threshold, with the tax increasing $0.25 on the dollar for the next $5 million spent and $0.75 on the dollar for each of the ensuing $5 million spent.
It’s something the Nets must consider as they sit at the intersection of any Damian Lillard or James Harden mega deal this offseason. After dumping Joe Harris’ and Patty Mills’ contracts in cost-cutting moves, it’s safe to say avoiding the luxury tax is a priority in Brooklyn this offseason.
Yet with two mega deals on the table in Philly and Portland, the Nets are in a holding pattern of sorts.
The organization is armed with eight tradeable first-round picks in 2025, 2027 and 2029, and has a number of easily tradable and coveted contracts that can be moved both to create cap space and acquire additional draft assets. Brooklyn has positioned itself as the perfect third party for any team, like the Miami Heat, either in need of additional assets to sweeten a deal or cap space relief to acquire a star like Lillard, who is owed $45 million in salary this season alone.
Here’s a practical example: The Nets have an $18.1 million trade exception available after trading Durant to the Phoenix Suns. Miami Heat sharpshooter Duncan Robinson has three years remaining on his contract and is owed $18.1 million next season.
The Nets could agree to take on Robinson’s contract and future draft compensation from the Heat in exchange for a conditional second-round pick.
In this scenario, the Nets are not sending any outgoing salary and are acquiring a sharpshooter thanks to a trade exception created from the Durant deal, while the Heat are creating room to take on Lillard’s 2023-24 salary.
The issue here, of course, is the repeater tax: The Nets are already at $155.4 million in payroll and the luxury tax threshold sits at $165.3 million. In this scenario, the Nets would not be taxed on the first $9.86 million of Robinson’s contract. The remaining $8.3 million on Robinson’s contract, however, would be taxed at the repeater tax rate of $2.50 on the dollar for the first $5 million and $2.75 on the dollar for the remaining $3.3 million.
That’s $21.575 million in taxes on top of Robinson’s owed $18.1 million deal.
Is Miami’s sharpshooter a $40 million player? The answer is a resounding no.
And does he move the needle in Brooklyn’s attempt to make a further playoff run after last season’s first-round sweep at the hands of the Philadelphia 76ers? Robinson did shoot 44.2% from deep across 23 playoff games during Miami’s NBA Finals run, but he was hardly the reason a depleted Heat team nearly gritted its way to a championship trophy.
Robinson-to-the-Nets is only hypothetical — the Nets are not interested in entering the luxury tax for the one-dimensional shooter — but it’s a real-world example of how shrewd the front office must be with its remaining salary cap exceptions.
Brooklyn owns the non-taxpayer mid-level exception of $12.4 million but can only practically spend $9.86 million of it on free agents before incurring tax penalties. The Nets also have the bi-annual exception of $4.5 million and own two more sizable trade exceptions outside of the exception generated from the Durant deal: a $19.9 million trade exception from the Harris deal with the Pistons, plus an additional $6.8 million trade exception from the Mills trade to the Rockets.
The Nets, of course, can always acquire a more impactful player, like Miami’s Tyler Herro, without using their trade exceptions by matching Herro’s $27 million salary with outgoing player contracts.
In the end, it’s about avoiding the repeater tax — especially if this is a team that isn’t expected to make a deep playoff run this season, though Nets general manager Sean Marks will be the first to say publicly he isn’t in the business of putting limitations on any player or group.
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