Home NBA NBA trade deadline looms as teams look to shed highly paid players to avoid tax bills – CNBC
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NBA trade deadline looms as teams look to shed highly paid players to avoid tax bills – CNBC

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Now that the National Football League has wrapped up its season, following the Kansas City Chiefs’ comeback win over the San Francisco 49ers in Super Bowl LIV, eyes will shift to the National Basketball Association, with the league’s trade deadline coming this week.

The names will surface, as some teams like the Los Angeles Lakers, Clippers, and perhaps the Philadelphia 76ers attempt to make moves to strengthen their position to compete for an NBA title. At the same time, some will look to offload money, hoping to avoid a luxury tax bill.

ESPN has already reported one of the first big names floating around in trade discussions, as the Houston Rockets are flirting with the idea of trading center Clint Capela, who signed a five-year, $90 million deal with the team last season.

“They’re done with Capela,” one Western Conference executive told CNBC, requesting that his name remain anonymous.

According to league sources who spoke to CNBC, Rockets owner Tilman Fertitta is seeking to shed additional salary off the team’s nearly $140 million payroll hoping to avoid a luxury tax.

The way the tax system works is the NBA penalizes a team when its payroll rises above $132 million for the 2019-20 season. If a team is over the mark by $5 million or less, it will be charged $1.50 for every dollar it exceeds. The tax rises to $1.75 for every dollar in the $5 million to $9.99 million range; to $2.50 if the total doesn’t surpass the $14.99 million mark, and to $3.25 if it is in the $15 million to $19.99 million range. From there, the tax will increase 50 cents for each additional $5 million a team is over, according to the NBA-NBPA collective bargaining agreement.

Where it gets steep is if a team is considered a repeat offender. If a team pays the luxury tax in at least four out of five seasons, the fee is then increased by $1.00. In other words, if a team is over the cap in the $5 million to $9 million range, the penalty increases to $2.75 for every $1 over.

It’s a considerable price for owners to pay if they chase NBA championships with a roster loaded with large contracts. Over the years, some owners may feel the tax bill isn’t worth it if a team is not viewed as a serious contender.

Some league executives are under the belief that Rockets general manager Daryl Morey, who sparked the NBA-China rift last October, is under pressure from Fertitta to decrease salary while at the same time staying competitive as the team currently sitting in the fifth seed in the West.

“He’s got a new owner now. This isn’t the old days with Leslie Alexander; he’s with Fertitta now, who counts every penny. It’s a new world there,” said the executive.

ESPN did report the Rockets had conversations surrounding Capela with the Detroit Pistons in exchange for center Andre Drummond, which CNBC confirmed. Talks were suspended with no word if the two teams will speak again before Thursday’s at 3 p.m. deadline.

Some GMs have even turned their eyes to the San Antonio Spurs’ roster, as the team has a few wings and shooters, which have been the target of the trade market.

With a team salary of roughly $123 million, the Spurs are not in the luxury tax, but they do have two wings and a shooter that could become future draft pick assets. The Spurs are working with DeMarre Carroll’s agent Mark Bartelstein of Priority Sports & Entertainment to find a new home for the forward, who signed a three-year, $20 million deal last offseason.

Carroll, 33, hasn’t found any playing time with the Spurs and is looking to move on, and the team is also shopping 3-point specialist Marco Belinelli. As of now, no serious suitors have stepped up as Belinelli is considered a significant defensive liability.

But in conversations with league executives, the belief is the Spurs are aiming to make the eighth seed, which would give the team 23 consecutive postseason appearances and set a new NBA record. The only other teams with that many consecutive appearances are the Syracuse Nationals and Philadelphia 76ers. The Portland Trail Blazers are next on the list with 21-straight seasons making the playoffs, and the Utah Jazz, with 20, are third.

“They are 100% obsessed with getting that eighth seed,” the executive said.

If the Spurs are serious about the playoffs, trading big man LaMarcus Aldridge or wing DeMar DeRozan does not appear to be the goal, but it gets interesting when mentioning forward Rudy Gay’s name to league executives.

The Spurs could be willing to part with Gay, who re-signed with the team last summer and is averaging 10.1 points and 5.6 rebounds this season.

“If they get a nice asset back, I think they would do something with Rudy Gay, but I think their asking price is too high,” said the league executive.

“Rudy still has something in his tank,” said an NBA scout, who added teams are not dying to help the Spurs as the franchise had dominated the league throughout Gregg Popovich’s tenure as head coach.

Other sellers on the market include the New York Knicks, who have put out feelers on forward Marcus Morris. Also, Sixers guard Zhaire Smith was being mentioned in possible packages for Pistons guard Derrick Rose, an Eastern Conference league executive said.

To further shave its tax bill, the Golden State Warriors could be looking to ship center Kevon Looney, while the Memphis Grizzlies could find a new spot for forward Jae Crowder, but their asking price – a first-round draft pick – could be too high at the moment.

And the Grizzlies are still holding veteran forward Andre Iguodala’s contract hoping it can land an excellent package for teams looking for a defensive wing.

Minnesota’s Robert Covington is another defensive wing that could be on the move, too. According to league sources, the Timberwolves are also seeking a first-round pick and could get it as Covington’s value is high.

“He has a distinct NBA skill,” another Western Conference executive said. “He can make 3-pointers in the slot and the corner, and he will also do an incredible job of guarding his man. And he’s got a reputation of being a pretty good dude.”

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