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The real question: How much tax is Oklahoma City willing to pay?

Aug 20, 2012, 5:43 PM EDT

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Clay Bennett and the Oklahoma City ownership has said before they are willing to pay some luxury tax to keep the core of their team together.

Next year that will be put to the test.

They have Kevin Durant and Russell Westbrook on max deals, and they just signed Serge Ibaka to a four-year, $48 million deal. Next up is James Harden. Next summer he will become a restricted free agent and unless the Thunder can convince him to take less he is going to get a max offer on the open market from someone. A number of teams will have the cap space (probably about 10, depends on moves between now and then) to make a max offer and Harden — Sixth Man of the Year, gold medalist, marketable — will get one.

The Thunder can match. But if they do they are paying the tax, and how much is the team in the NBA’s smallest market willing to pay? Zach Lowe breaks down the numbers at Sports Illustrated’s The Point Forward blog.

If Harden gets that max deal from Oklahoma City, the Thunder will be paying the tax for at least the 2013-14 and 2014-15 seasons. Assuming a max deal for Harden and that Oklahoma City gets the No. 30 pick in each of the next two drafts, the Thunder would be set to have about $75.5 million committed to 10 players in 2013-14 and $77 million committed to the same number of players in 2014-15. Fill out the rest of the roster on the cheap — forget the mid-level exception — and Oklahoma City will be looking at $80 million payrolls in those seasons….

The tax line is at $70.4 million now, and it will go up as league revenues rise. But most projections have the tax line somewhere around $75 million in the 2015-16, and very solid growth (about 3 percent) would have it jump only to $72.5 million in 2013-14 and $74.6 million in the following season. Note again: These are estimates.

Under the harsh new tax rates that kick in for the 2013-14 — just in time! — the Thunder would be paying a tax bill ranging from $7.5 million to $12.5 million or so, depending on the exact tax level and how much the team’s ownership is willing to spend on the back of the roster. Is Oklahoma City, the league’s second-smallest market, willing to spend something like $85 million or even $90 million to fill a team?

I bet the answer is yes. They can save money by doing things like using their amnesty on Kendrick Perkins. More importantly, so long as the Thunder are winning they will be able to sell the luxury boxes and sponsorships at a premium, and the regular seats sell out every game to a very loyal fan base. I think the losses (if any, how NBA owners keep the books is murky) would be minimal.

The Thunder can’t afford to go Los Angeles Lakers with their payroll — Los Angeles with taxes and revenue sharing could be paying $230 million in a couple years to field a team at their current payroll levels — but they can afford some tax. They can afford to chase the ring.

The Thunder will be what the Heat and Lakers are, what future contenders will look like — a handful of highly-paid stars surrounded by the best they can get on inexpensive contracts. It is the wave of the future.

  1. zblott - Aug 20, 2012 at 5:46 PM

    Probably not as much as the Lakers, they of the $150 million/year local TV deal.

    http://www.behindthebasket.com/btb/2012/8/15/fixing-the-haves-and-have-nots-problem-of-the-nba.html

  2. superseahawk - Aug 20, 2012 at 5:58 PM

    Harden isn’t worth a max contract. He’s a young Jason Terry, nothing more. He was exposed in the Finals.

  3. norcal031 - Aug 20, 2012 at 5:58 PM

    they are gonna have to get rid of Perkins and harden may have to take less. He is not a max money player. What they need is low post scoring.

  4. lakerluver - Aug 20, 2012 at 8:06 PM

    @norcal031
    I agree. OKC got exposed last season. As one dimensional as they are offensively it’s going to be difficult to win a title. Not only do they not have any low post scorers, they don’t even have a low post threat! And as much as I like Harden’s game he is not a max player. He too got exposed in the Finals. OKC fans just assume they’re the team of the future but I’m not so sure. I recall a Portland team that featured Drexler, Porter, Kersey, etc., that was supposed to win titles. That team was much more balanced then OKC is now and they didn’t win anything

  5. eugenesaxe - Aug 20, 2012 at 8:27 PM

    Well, they should have an idea how much profit they’ll be making over the next 3-4 years. Once all the bills are paid etc., why not pour everything else into winning a title? They won’t b getting too many chances at it.

  6. thundersandpackers - Aug 20, 2012 at 9:23 PM

    you ask yourself, what is more important winning a title or paying taxes?
    I SAY THE TITLE

  7. monkeyhateclean - Aug 20, 2012 at 11:28 PM

    What does the league do with this “luxury tax” money? Do they redistribute back to the owners? Do “smaller” markets get a bigger chunk?

    • manchestermiracle - Aug 21, 2012 at 10:50 AM

      It is distributed to those teams under the cap. So for all you capitalism-is-always-good, communism-is-always-bad types: This is as socialist as it gets in a capitalist system.

  8. loungefly74 - Aug 21, 2012 at 9:27 AM

    for the sake of the fans (and the NBA), hopefully OKC will do whatever it takes to remain a contender. personally…i think every team should be owned by billionaires willing to throw cash left n’ right executing moves to contend consistently for the title by any means necessary.

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