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Jul 10, 2017
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When we last left you, we went to some lengths explaining the circumstances behind all the superstar movement we’ve seen since free agency opened last week. Now, we’re going into detail, answering queries surrounding the most perplexing question about the NBA free agency: "What is the salary cap?"

So what is it?

Basically, the salary cap is a specific amount that’s set before every season by the NBA. The cap is what can be best explained as a budget every team has for player salaries. This year, the salary cap was set at $99 million, an increase of $5 million from last season. Certain provisions in the NBA’s collective bargaining agreement allows teams to exceed their salary cap, especially when they have to retain their own players, hence the term “soft cap.”

There is, however, what’s called a luxury tax—set at $119.3 million for the upcoming season—and teams that go past the luxury tax will have to pay the NBA the equivalent of tax money, set at specific amounts depending on whether they’re non-repeat offenders or repeat offenders.


How much tax money do teams over the luxury tax threshold have to pay?

The terms “non-repeat offenders” and “repeat offenders” are important here because the amount they have to pay depends on where they qualify. The scientific calculations that determine the tax money is way above our heads, but in simplest terms, non-repeat offenders pay one dollar for every dollar they exceed the luxury tax. Repeat offenders have it worse, because depending on how many times they’ve exceeded the luxury tax in recent years, they could be in line to pay as much as five dollars for every dollar they exceed the luxury tax.

Which teams exceeded the luxury tax this season?

Computations are not out yet, but last season, the Cleveland Cavaliers footed the highest luxury tax at $54 million. The Los Angeles Clippers were a distant second with a $19.9 million tax bill, followed by the Golden State Warriors at $14.8 million, and the Oklahoma City Thunder at $14.5 million. This season, the Cavs are expected to foot an even {bigger} tax bill, as do the Warriors and other teams who have exceeded the luxury tax limit.


Is Kevin Durant’s two-year, $53-million deal the best signing of free agency?

You better believe it is, and it’s not because Durant is back for at least two more seasons with the Warriors. It’s because he actually left $9 million per year on the table just so the Warriors could resign Andre Iguodala, Shaun Livingston, Zaza Pachulia, Nick Young, and Omri Casspi to the amount of money they got. Had KD signed for the maximum amount he was due, the Warriors wouldn’t have had the space to re-sign both Iguodala and Livingston and would have probably had to let Pachulia walk. But instead of getting $72 million for the next two years—$36 million per season—Durant settled on a contract that will pay him $25 million this upcoming season and $27 million next season. As they say, the rich got ridiculously richer.

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What’s the mid-level exception?

The mid-level exception is a pre-determined amount that all 30 teams can use to sign players without the restrictions put in the salary cap, hence its disclaimer as an “exception.” There are however different versions of the mid-level exception depending on where a team sits with its salary. For example, teams whose salary falls below the luxury tax apron—set at $125 million—can offer free agents four-year contracts with a maximum starting amount of $8,406,000. On the other hand, teams whose salary falls above the luxury tax apron can only offer free agents three-year contracts with a maximum starting amount of $5,192,000. All teams do have the option to use the mid-level exception on just one player or multiple players depending on how they spend the money.

What complications are there that’s preventing Carmelo Anthony from getting out of New York?

The most obvious term being thrown around is the “no-trade-clause,” which essentially is a quirk in the NBA CBA that allows players to have veto power on trades involving them. The NBA does place strict restrictions for a player to qualify to have a no-trade clause in his contract. First, he has to have at least eight NBA seasons of experience and four seasons of experience with the team he is signing with. A no-trade clause can also be included into a new contract, not a contract extension.

Carmelo Anthony is one of a few players in the league to have a no-trade clause in his contract. That means that for the Knicks to trade him, he’s going to have to waive his no-trade clause. This is difficult for the Knicks because they can’t just ship him off anywhere; they have to get Anthony’s consent.

As complicated as it sounds, Anthony’s no-trade clause isn’t really the biggest issue here. That would be his trade kicker.


What’s a trade kicker?

A trade kicker is basically a bonus a player receives in the event he gets traded. There is no specific percentage tied into the trade kicker but the maximum allowed is 15 percent of the remaining value of the current contract he’s in. In the case of Anthony, if he signs off on a trade to another team and uses his full trade kicker, the team he’s going to will have to absorb the current amount of his contract—two years, $54 million—plus another 15 percent of that number. Do the math and Anthony’s trade kicker amounts to $8.1 million. Now add that amount to his salary for the upcoming season—$26,243,760—and the team that will trade for him will have to account for his increased salary that now stands at $34,369,545. Not only is that a significant portion of the salary cap to commit to Anthony, but the team trading for him will also have to send back contracts amounting to at least $27,415,636. Anthony does have the right to dictate how much of his trade kicker he wants to use or waive the whole thing entirely.

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Can’t the Knicks just buy him out?

This is possible, but it would need Anthony’s participation as well. Buy-outs work if the team and the player agree to a reduced amount of the money owed to a player for the player to have a chance at becoming a free agent. The Knicks and Anthony can negotiate on terms of a buy-out, but it would require Anthony accepting less than what he’s owed if he just stayed with the team. The Knicks also have the option to waive Anthony, but doing so would mean that his contract will remain part of their salary cap. In the event the Knicks really do want to move on from Anthony at any cost, waiving him is the easiest way to do it, even if they don’t get any assets in return.


What’s the stretch provision?

It’s possible, and the Knicks do have the stretch provision to use to help soften the blow of having Anthony’s contract still included in the salary cap. The stretch provision is a tool that teams can use to stretch a player’s contract past its life-span in a effort to lower the cap hit they stand to take. For example, if the Knicks waive Anthony, the can stretch his two-year, $54 million contract to, say, five years. So instead of having Anthony’s $27-million salary count on their cap in each of the next two seasons, they can instead use the stretch to provision to lower his cap hit to $10.1 million over the next five years. The caveat to this is that Anthony’s cap hit will last three seasons longer, but at least the Knicks get momentary relief by freeing up cap space for the next two years.


Where does Melo end up then?

Three possible scenarios are being thrown out. One is that he accepts a buyout, making him eligible to sign for any team. The other is through trade, with the Houston Rockets being the most likely destination. The last scenario is he stays with the Knicks. Our prediction? He ends up in Houston on what arguably will be one of the most complicated trades in NBA history.

 

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