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Payroll musings and avoiding the luxury tax in the future

Editor's Note: Bumping this back to the top for further discussion. -PM

Warning: Long post

One of the biggest criticisms of our offseason is that we killed our salary cap and luxury tax flexibility for a team that is not quite a championship contender.  The idea is that we're basically stuck with the club we have unless we want to go over the luxury tax. 

We've talked about ways to use our assets in 2010 to land an impact player, but haven't really discussed whether we're doomed to go over the tax if we do that.  Are we really doomed to going over the tax? 

First things first, here's our team salaries for the next five years (click on the picture to make it bigger).  The player salaries are from Sham Sports and the salary cap and luxury tax estimates are from Canis Hoopus.


Grey=Unguaranteed | Brown=Early Termination | Blue=Team option | Green=Player option | Red=Qualifying offer | Orange=My best guess

As you can see, if the salary cap and luxury tax numbers go up at the same rate, we're going to be over the luxury tax next year with 14 players.  That's even after switching Gilbert Arenas' normal first- and second-year salaries, which is my only explanation for how we went from having 3.4 million dollars under the luxury tax this year to somewhere between 1 and 1.5 million.  Having Arenas take a pay cut in Year 2 makes it more likely that we'll avoid the luxury tax next year, but from the looks of things, we'll be over it anyway.

To put it bluntly, that's really bad.  Even if the luxury tax figure ends up a little larger than that estimate and allows us to stay under with the 14 players we already have, it means that we aren't going to be able to use our draft pick next year without going over the luxury tax.  (As an aside, this is another reason why drafting a project player that plays the same position as your other project players was not smart, especially when there were other positions to fill).   For those of you who were annoyed when we sold Bill Walker to the Celtics, get ready to be even more annoyed when we sell both our draft picks. 

That's all to keep the team we currently have through the 2009/2010 season, but what if we make an upgrade in 2010, as discussed here?  For the purposes of this exercise, let's say we traded Etan Thomas, Antonio Daniels, Nick Young and a first-round pick in the 2010 draft to Atlanta for Joe Johnson and some minimum-salary guy like Randolph Morris.  Here's how our payroll structure would look:


Our depth chart would be as follows:

PG: Arenas/Brown

SG: Johnson/Stevenson

SF: Butler/McGuire

PF: Jamison/Songaila/Blatche

C: Haywood/Pecherov/McGee/Morris

About the same, except thinner in the backcourt and younger up front.  But our payroll in 2009 remains the same, albeit with one less player.  Going with 13 players is what we did last season, and that proved to be a mini-disaster.

More importantly, let's look at what happens after 2010.  We have only eight players under contract and only 18 million dollars under the luxury tax to fill those spots(ignore the 9).  We also have no first-round pick, since we traded it to Atlanta.  18 million dollars may not be enough to re-sign Johnson and Haywood, much less sign four other players to fill out the roster.  Clearly, our only recourse is to go over the luxury tax...

Unless we dump some salary right now. 

In Antonio Daniels, Etan Thomas and Darius Songaila, we have three guys making mid-level money or more that are likely not major parts of our future.  At the very least, they're either overpaid or they hurt our long-term flexibility.  Etan and AD are probably worth keeping because of their expiring contract value in 2010 (plus who backs up Arenas without AD?). 

That leaves Songaila as a guy who could be moved.  In our player evaluation of him, I made the case that while his numbers as a whole looked bad this year, he was playing extremely well down the stretch and was our best backup big (whereas Andray Blatche filled that role in the first four months of the season).  On the other hand, he's not getting any better and plays the same position as our best prospect, a guy who we're counting on heavily in the future.  Combine that with his salary, which goes all the way until 2011, and that he has some value around the league (well, more than Etan or AD at least because his contract is smaller), trying to move him, either now or at the trade deadline, for a player whose contract expires after next season seems somewhat realistic and prudent. 

I took a look for players expiring this year that make about as much as Darius Songaila and I came up with the following list:

I strongly doubt a team would swap a big for another big with a longer contract, so unless they fall off like crazy next year, we can probably rule out Smith, Pachulia, Hunter, Foster and Oberto.  The Raptors aren't trading Anthony Parker as long as he's their starting shooting guard, so I don't think that's going to happen.  That leaves Damon Jones, Greg Buckner and Desmond Mason.  Cleveland has plenty of bigs, so I don't see them being an ideal trade partner, though I suppose they'd trade a guy like Jones who does nothing for them if they could (especially if they move Anderson Varejao or Smith for bigger pieces).  Memphis isn't looking to add salary, so I doubt Songaila would be of much use to them.

Then, there's Desmond Mason.  Milwaukee traded for Richard Jefferson and drafted Joe Alexander, so they are overloaded at the small forward position.  Meanwhile, at power forward, all they have is Charlie Villanueva, and he plays a lot smaller than his frame.  As for us, Mason can play behind Caron Butler, giving us a backup small forward that we need.  I'd probably rather make that trade at the deadline so we can see how Andray is playing this year and how healthy Etan is, but then again, Milwaukee might not be contending then, so I'd even do it before the season.  Seems like a win-win.

Say we make that trade.  Here's our salary situation.


Now, we're over 4 million dollars under the luxury tax next season.  We can use that money on two draft picks, or if we're really concerned about our youth, we can use our first-round pick, sell our second-round selection, and use the remaining money to sign a veteran. 

Here's the kicker, though.  Say we made that same trade with Atlanta for Joe Johnson, draft a point guard with our pick and then sign someone like Jason Collins to the bi-annual exception to back up Haywood.  Here's how things break down:


Our depth chart would be as follows:

PG: Arenas/2009 first-rounder/Brown

SG: Johnson/Stevenson

SF: Butler/McGuire

PF: Jamison/Blatche/Morris

C: Haywood/Collins/Pecherov/McGee

That's a solid team, especially if Blatche takes another step forward.  A little young up front, but we could always renounce Pecherov's rights next year and sign another power forward for cheap.  More importantly, it gives us more flexibility in 2010 to re-sign everyone and still stay under the tax.  We have one less roster spot to fill and 2 million dollars more to fill it.  Not ideal, but it's better than what we'd have if we kept Songaila.  Even if the combined extensions for Haywood and Johnson come close to equaling that number annually, we can backload their deals and get creative filling the last two or three spots. 

Obviously, there are lots of contingencies, and we could make life easier on ourselves by trading for someone cheaper than Johnson (say, Rip Hamilton), but trading Songaila for any expiring contract seems like the best way to give ourselves that little bit of flexibility necessary to make a far bigger move and still stay under the luxury tax.