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We have a tax problem, and the only prescription is more trades (UPDATED)


EDITOR'S NOTE: I resumed this post.  See below.  -mp

It's never good to be this bad, even if there is a somewhat-reasonable built-in excuse for our performance (injuries, etc).  It's even worse, though, to be this bad and still be up against paying the luxury tax.

To review: You can exceed the luxury tax, but you must pay the league an additional dollar for every dollar you go over.  That extra money then gets redistributed to the teams below the tax, so basically, you have to pay more than double for going over the tax.  If you aren't a playoff team, and therefore don't receive revenue for playoff home games, then it's not a winning proposition to go over the tax.   

But with the economy floundering (thereby bringing down the expected luxury tax threshold) and the prospect of having to take on a high draft pick's salary, that is precisely where the Wizards stand after this season.  For now, we're under the luxury tax, and we'll remain that way if we do nothing until the end of the season.  But for the season after that, we are in trouble and we need to find a way under, unless you expect Abe Pollin to completely change his tune on paying the tax (unlikely).

Consider the following (all data from ShamSports):

Player 2008/09 salary 2009/10 salary
Gilbert Arenas 14,653,465 16,192,079
Antawn Jamison 9,923,285 11,641,095
Caron Butler 9,249,980 10,030,970
Etan Thomas 6,373,900 7,354,500*
Mike James 6,244,083 6,466,600**
Brendan Haywood 5,500,000 6,000,000
Darius Songaila 4,234,000 4,526,000
DeShawn Stevenson 3,616,071 3,883,929
Andray Blatche 2,739,669 3,000,000
Nick Young 1,602,960 1,714,800
Oleksiy Pecherov 1,446,720 1,547,640
JaVale McGee 1,392,240 1,429,640
Javaris Crittenton 1,381,560 1,477,920
Juan Dixon 797,581
Dominic McGuire 711,517 825,497***
2009 No. 2 pick (projected)

Total 68,485,471 79,806,370
Luxury Tax projection 71,150,000
Luxury Tax space +2,664,529

*=Early Termination.  **=Player Option.  ***=Team option

Even if we assume the tax level goes up at its normal rate, we're over two million dollars over it with our team alone.  If you add in the expected first-year salary of a top-five pick (anywhere from 2.7 million to 4.1 million), then we could be as much as six million in the red.  But with talk of the luxury tax level flatlining because of the poor economy, the situation becomes even more dire.  If the tax level stays the same as it did last year, we're suddenly looking at being around eight million over the tax after the season.  That gives us a year to shed eight million dollars in salary before the 2010 draft.

In essence, Ernie Grunfeld signed everyone to escalating contracts thinking the tax level would continue to rise and is now getting burned for it.  Every dollar counts too.  As much as it'd be nice to see Pecherov develop, was it really necessary to pick up his third-year option when it could have helped us get underneath the tax line?  Not doing that would have shaved our tax deficit from six million to 4.5 million.  And the "bidding against yourself" in the Songaila and Stevenson contracts, while not a dire issue, now becomes a problem when every dollar counts. 

Now, my biggest worry is that our need to get under the tax will once again be used to shed ourselves of the wrong guys.  In retrospect, Roger Mason was an example of this, when the solution could have been to trade Stevenson or Daniels for a 2009 expiring.  Now, it's too late for that.  I worry that Ernie's solution here will be to trade our pick or not pick up McGuire's team option.  Neither scenario would be the right way to go.

I have solutions to this problem, but I'm heading to class and will post them when I get back.  In the meantime, fire up your own ideas in the comments section.


UPDATE: Here we go.

First things first, Real GM contributor and sometime-BF commenter nate33 beat me to the punch on this issue by a couple days.  His solutions mirror mine, so apologies if I'm repeating a lot of what he says.

There's really only one way to cut eight million dollars, and that is to make trades.  The only player not under contract next season is Juan Dixon, and his salary doesn't count toward that eight million.  The Wizards could decline to pick up Dominic McGuire's third-year option, but that would save the club less than one million dollars (or less than one-eighth the deficit).  Considering the way McGuire has been used this season, I doubt the organization is planning on doing that. 

Technically, the 2009/10 luxury tax isn't collected until after the 2009/10 season, but it becomes more difficult to get under the tax during the season in which it is calculated.  A 2010 expiring contract goes on the 2010/11 tax number, not the 09/10 tax total.  That basically means that we can't simply elect to let Mike James and Etan Thomas expire rather than use them as assets for an upgrade. 

Therefore, unless we want to sell our top-five draft pick, we need to shed some of our long-term salary for contracts that expire in 2009.  With several teams in the same boat, that's not going to be easy, but it has to get done one way or another. 

(Before we go further, I need to mention something about Gilbert Arenas' contract numbers that may change exactly how much money needs to be shed.  If you were around this summer, you may remember that I calculated that we had about 3.4 million under the luxury tax this year immediately after signing Gilbert.  However, that total conflicted with a report by Mike Jones, who said that we, in fact, had only somewhere between 1 and 1.5 million dollars under the tax after the new contract.  (Keep in mind this is before we signed Dee Brown and Juan Dixon).  The logical conclusion I came up with is that the Wizards switched Arenas' first- and second-year salary to avoid tax problems down the road, but Jones' story said clearly that Arenas' first-year salary is 14.5 million.  Obviously, the discrepancy makes a difference.  I e-mailed both of them to get a clarification, so we'll see what happens with that.

If Arenas' first- and second-year salaries were switched, that'll move our gap from around eight million to something closer to 6.5 million).

First things first, how valuable are our guys on long-term contracts?  Going from most expensive to least expensive:

Gilbert Arenas: We're not trading him.  Nobody's touching that deal, and if he recovers, he should stay anyway.

Antawn Jamison: Antawn's on the hook for just under 10 million this year and 11.6 million for 2009/10.  Antawn's contract starts as low as it does because we needed to wiggle under the luxury tax this year.

Signing Jamison was a move made with the intention of competing right away.  It's much easier to justify going over the luxury tax when you are close to being an upper-echelon team.  Jamison's new deal indicated the front office believed at the time that it was close to that designation.  It was a move to win now and accept the cap consequences later, plain and simple.  We don't know whether Abe would have wanted to go over the tax if we were winning, but we definitely can say there's a better chance of him relenting.  Therefore, while Jamison's contract may become an issue monetarily down the road (as soon as next season), the team winning may have counteracted that negative.

Unfortunately, we aren't winning now.  This year is a lost season and with the way Arenas is recovering, you never know about next year either.  For every passing season, then, Jamison's contract becomes more and more of an albatross.  This was a risk I'm sure the organization knew about, but it's a risk they took that is hurting them right now. 

If finances weren't at play, I'd be tempted to forget about the previous paragraph and just hope Jamison continues to age gracefully, with the hope that we'd recover completely before his game falls off.  The problem, though, is that finances are at play and our other players on long-term deals don't have the value Jamison does.  To quote nate33:

The bottom line though is that in the likely event that EG can't dump any of our crappy contracts, EG must seriously consider trading Jamison. It's no longer a theoretical conversation on whether or not an aging Jamison will help this team going forward and if he's worth the money. It's now a choice between keeping Jamison or keeping Haywood and DMac. I don't think it's possible to keep them all past 2010.

To take it another step forward, if we can't trade anyone else, it's really a choice between keeping Jamison or keeping Haywood, D-Mac and our top-five pick next year.  Alternatively, it's potentially keeping Jamison or keeping Haywood, D-Mac, Nick Young and Andray Blatche.  I love Jamison, but he's not that valuable. 

Ideally, we'd trade someone else and keep Jamison, for many reasons.  Jamison is not only a good locker room guy, but he's also having one of the best seasons of his career.  Even at 32, he's showing no signs of slowing down.  On the other hand, though, a Jamison trade could yield the best return and singlehandily solve our financial problems.

Caron Butler: We could trade him, I suppose.  He's extremely valued around the league and would definitely yield an excellent return.  But his contract is more than fair value for his services, and he's younger than Jamison.  I'd rather hang on to that if possible.

Mike James: As frustrating as it can be to see James play so much, it has actually paid off in that he does not look like the decaying corpse he was in New Orleans.  An 11.8 PER and 49.4 true shooting percentage is still really bad, but at least that makes him a rotation player. 

So while James still sucks, he at least may have recouped some of his trade value.  His contract doesn't extend past 2010, so he wouldn't burden a team going that route if he were traded there.  It's worth mentioning as well that, since James was traded in midseason, you have to wait 60 days before he can be traded again with another player.  The AD/James/Critt trade occurred 62 days before the trade deadline, which I don't think is a coincidence.

Trading James destroys our "trade 2010 expirings for an upgrade" plan, but it's still worth it considering it would potentially solve our problems singlehandily.

Etan Thomas: The recent injury killed any chance of him recovering any trade value.  Ernie's been trying to move him for years.  It isn't happening.

Brendan Haywood: Not happening. 

Darius Songaila: Of all our role players on long-term contracts, Songaila has the most value to a contending team.  Several clubs may have a need for a backup power forward and Songaila can maybe fill that need.  His skills are exactly the same ones that may help us, but unfortunately, we can't afford that luxury at this point. 

Ernie needs to be looking to trade Songaila right away.  We'll get into specifics below.

DeShawn Stevenson: I'd love to trade him, but who's going to give up anything for him right now?  If he had been playing at the level he did last year, I'd advocate giving him up.  Unfortunately, he sucks and he's injured.  In retrospect, the organization made a major mistake in insisting Stevenson not play hurt.  It both depreciated his value and came back to bite them when Stevenson actually got hurt right around the trade deadline. 

Andray Blatche: My nightmare scenario is that Ernie is forced to use Blatche as a sweetner to getting a team to take one of the above players, or worse trading Blatche for cap relief straight up.  I firmly believe we cannot let this happen.  I'm only trading Blatche for a clear upgrade. 

Nick Young: Ditto, though less so.

Oleksiy Pecherov: Pleeeeease teams, take him!

JaVale McGee: Don't trade him.

Javaris Crittenton: I suspect that we might have to part with him in order to clear space on the roster.  Unfortunately, he's been on so many teams that I'm not sure how much value he has. 

Dominic McGuire: He may also have to be a casualty of this gap.  And if so, it's too bad, but better him than Nick, Dray or JaVale. 

Alright, so we have the lowdown on each player.  Let's parse these down into two groups.  I'm leaving Gil and Haywood off this list because they're hurt.  I'll also list which teams might fit them best, forgetting the plausability of such scenarios.

Veterans (from most valued around the league to least valued)

  1. Caron Butler - (LA Lakers, Minnesota, Portland, Toronto)
  2. Antawn Jamison - (Cleveland, Portland, Houston, Milwaukee)
  3. Darius Songaila - (Denver, Phoenix, Milwaukee, New Orleans, Orlando)
  4. Mike James - (Boston, Dallas, Orlando)
  5. DeShawn Stevenson - Nobody
  6. Etan Thomas - Nobody

Young guys (in order of value around the league)

  1. JaVale McGee
  2. Andray Blatche
  3. Nick Young
  4. Dominic McGuire
  5. Javaris Crittenton
  6. Oleksiy Pecherov

So, knowing this, here are some possible trades I came up with:

The Dream Scenario: Antawn Jamison and Darius Songaila to Cleveland for Wally Sczcerbiak and J.J. Hickson

Why is this the dream scenario?  Making this trade would save us an incredible amount of money while also allowing up to pick up another youngster in Hickson.  Sczcerbiak's contract expires this season, shaving over 13 million dollars off our cap, more than enough to solve our tax problem.  Hell, we could even sign a free agent with that money.

I also think this trade helps Cleveland immensly, though Delonte West's recent injury doesn't help matters.  The Cavs are pretty shallow in the frontcourt, with only Zydrunas Ilgauskas, Anderson Varejao and the decaying Ben Wallace.  Jamison would immediately step in at the power forward spot and would be a great fit.  He plays well off playmakers, is a good three-point shooter and can be a 3/4 hybrid with LeBron at times.  He isn't much of a defender, but neither was Mo Williams.  Meanwhile, Songaila takes Lorenzen Wright's spot in the rotation, suddenly giving Cleveland a ton of options up front. 

It's a lot of long-term salary for Cleveland, but I think they'd take the risk with their team close to a title this year. 

Other ideas

  • Mike James and Javaris Crittenton to Orlando for Brian Cook, Anthony Johnson and J.J. Redick: Orlando's biggest weakness is backup point guard, and while James is wild, he's an upgrade on Anthony Johnson.  Cook stinks, but he has an expiring contract, as does Johnson.  Meanwhile, Redick is stuck behind a plethora of players, and swapping him for Crittenton, who I remember Orlando wanting in the offseason, provides an incentive.  We save about five million dollars.
  • Darius Songaila to Milwaukee for Damon Jones: Milwaukee is a playoff team now, but despite the emergence of Luc Richard Mbah a Moute, they're a bit thin up front.  Songaila could give them another big and it would only cost them Jones, a guy who isn't playing anyway.  Jones' contract expires after this season, so we'd save money.  Alternatively, we could add in Pecherov and perhaps Juan Dixon, and Milwaukee could throw in Tyronn Lue, who is a 2.5 million dollar expiring contract and also doesn't play much.  We save around 4.15 million in the first scenario and about six million in the second.
  • Darius Songaila to Orlando for Brian Cook: Cook never plays and he sucks, so Songaila would be an upgrade.  We save 3.5 million dollars.  
  • Antawn Jamison and Dominic McGuire to Portland for Channing Frye, Travis Outlaw, Ike Diogu and Sergio Rodriguez: Frye and Diogu combine for around five million in expiring contracts.  I love Outlaw's game, and Rodriguez needs a change of scenery with Jerryd Bayless' emergence.
  • Mike James to Dallas for Jerry Stackhouse: Dallas could use a backup point guard, and Stackhouse's contract is only guaranteed for two million dollars in 2009/10. 
  • Mike James to New Jersey for Stromile Swift: Swift doesn't play anyway and James doesn't mess up the Nets' 2010 plans.  We save over six million
  • Mike James to New York for Malik Rose: Ditto.
  • Javaris Crittenton and Juan Dixon to Toronto for Joey Graham: Graham's expiring and Critt gives Toronto a backup point guard.
  • Darius Songaila to Charlotte for Sean May and Alexis Ajinca: Right out of the Larry Brown playbook: win now and screw later.  May and Ajinca aren't playing, and May has an expiring contract.

These are just some ideas.  Either way, my feeling is we need to be active at the trade deadline if we want to cut the salary we need to cut. 

But do you guys have any other ideas?  And do you agree with the premise?  Let me know what you'd do in the comments.