MILWAUKEE: In 15 years of the NBA’s luxury tax era, the Miami Heat have paid a total of $50 million in taxes. The Cavaliers are on pace to pay $65 million this year alone.
If you’re looking for reasons why LeBron James is in Cleveland and not still on South Beach, this is a big one. The Cavs spent their summer soaring to the second-highest payroll/tax figure in league history. The Heat have spent the past few months paring their cap in an effort to get under the tax threshold.
The Heat’s recent deal sending Mario Chalmers to the Memphis Grizzlies followed July’s trade of Shabazz Napier to the Orlando Magic. Both were money dumps, and there is more to go. The Heat still need to shed a little more than $5 million to get out of the tax altogether and avoid the dreaded label of repeat offender.
In this area, the Cavs hold an advantage. Last season was their first paying the tax since 2010, meaning they don’t have to fear repeat offender status for a few more years.
As a repeat offender, the tax rate becomes even more punitive. No NBA team has yet to pay it. The Heat would be the first, but is clearly trying to avoid that.
It’s impossible to know if the Heat would be trying so hard to cut salary and get under the tax if James never left. It would certainly be difficult to avoid the tax with three superstars. What is clear today, however, is Heat owner Micky Arison seems to be tapping out.
The Heat still have an excellent starting lineup and are playoff contenders in the East, but are no longer an NBA superpower. And after paying nearly $34 million in luxury taxes since James first went to Miami, Arison clearly has had enough. From the day the “repeat offender” clause was added to the collective bargaining agreement during the lockout, general managers and owners have viewed it as a game changer. Indeed it is.
Part of the reason why James came home is because he knew Gilbert would spend. And spend and spend and spend. Players get aggravated by owners who say they want to contend for a championship, then start cutting costs. That has not been Gilbert’s strategy.
“When you invest in something like a sports franchise and you’re in for so much ... if you at the margins start pulling back, I think that may be foolish on a lot of fronts,” Gilbert said prior to the start of this season. “We’re investing for the future as well as the current.”
Regardless of how far they go, Gilbert will stand to lose millions this season. Not even an NBA championship will net a return of the $175 million he has invested into this team. It’s fair to wonder how long he can sustain such hefty losses. Brooklyn Nets owner Mikhail Prokhorov lavishly spent $90 million in taxes two seasons ago, only to finish sixth in the East and suffer a second-round exit in the playoffs. The Cavs obviously have the talent to fare much, much better this season.
But even Prokhorov, one of the world’s wealthiest men, behaved like Arison last summer and slashed payroll in an effort to avoid the tax and repeat offender status.
The Cavs still have a $10.5 million trade exception at their disposal, but using the majority of it would break the Nets’ $197 million payroll/tax record and make the Cavs the league’s first $200 million team. If this roster as constructed stays healthy, the Cavs might not even need the trade exception. But it’s a nice insurance policy to have — if there is room left in the budget to use it.
Gilbert sidestepped a question about using the trade exception a couple weeks ago. He also didn’t really answer when asked how long he can continue paying this hefty of a tax.
“We look at this year by year,” he said. “There are so many factors, so many things can change. We always like to have options. It’s not so much the amount of payroll. The question is if you can maneuver. If the team goes a certain way, are all the contracts valuable? Can your general manager still play chess? We never try to say this is [the limit].”
Maybe Pat Riley and Arison will win big after all. Maybe Riley will pull off another heist, convince Kevin Durant to follow James’ free-agent path to Miami and sprinkle enough magic dust over the salary cap to make the numbers work. Riley’s craftiness should never be dismissed.
For now, the core of the Cavs is locked up for at least four more years. As Gilbert said, that’s an eternity in the NBA. Past big spenders like the Heat and Nets are now pulling back. The Cavs are just getting started.
Jason Lloyd can be reached at jlloyd@thebeaconjournal.com. Read the Cavs blog at www.ohio.com/cavs. Follow him on Twitter www.twitter.com/JasonLloydABJ.