RJ's Contract Details

[Solid D]

So does this mean RJ could be making $12.2 mil in his final year

Estimated new contract
2011 $8,400,000
2012 $9,282,000
2013 $10,164,000
2014 $11,046,000 (option)

[Boss]

Estimated new contract
2011 $8,400,000
2012 $9,282,000
2013 $10,164,000
2014 $11,046,000 (option)

Timvp, just posted some RJ contract news on the previous page. Basically there's a performance incentive in the final yr that would push his deal to 4 years $40 mil rather than $38.8 mil

[Solid D]

Timvp, just posted some RJ contract news on the previous page. Basically there's a performance incentive in the final yr that would push his deal to 4 years $40 mil rather than $38.8 mil

Ah, I missed it. $1.2M additional performance incentive. Thanks Boss.

[D-rob fan]

For those of you that don't like this contract, it's not as bad as it seems.

Let's say RJ never opted out and the spurs were set to pay him $15 million this season. Using details of the rest of the salaries from hoopshype, our team salary would be $75,867,728. With the luxury tax at $70 million, that would result in the spurs having to pay a luxury tax of $11,735,456 ($5,867,728 x 2).

Now that RJ has resigned for less, the spurs will be under the luxury tax. In doing so, they can then be set to recieve a luxury tax payout for being a team under the tax. Lets assume that payout is a conservative $3 million. That means this year alone, RJ's new contract saves the spurs $14,735,456. RJ's new contract pays out $38,892,000 over 4 years. So subtracting that from the full length contract, his 4 year contract is in essence only $24,156,544. That's appoximately $6 mil a year. For a player of RJ's caliber, that is certainly nothing to complain about.

Another way to think about it is say RJ opted in and spurs had to pay his $15 mil and tax which comes out to $29,735,456. Subtract that from RJ's new contract and that means we basically signed RJ for a 3 year (2011-2014)extension for only $9,156,544. Now that sounds even better!

Team Salary (salary in parenthesis assumes old RJ contract)
Tim Duncan -$18,700,000
Tony Parker - $13,500,000
Manu Ginobili - $11,854,584
Richard Jefferson - $8,400,000 ($15,000,000)
Antonio McDyess - 4,860,000
Matt Bonner - $3,000,000*
Tiago Splitter - $3,400,000
James Anderson - $1,361,400
George Hill - $1,157,160
DeJuan Blair - $918,000
Malik Hairston - $854,389
Alonzo Gee - $762,195
Gary Neal - $500,000*
TOTALS:
$69,267,728 ($75,867,728)
*estimated

[toki9]

Using details of the rest of the salaries from hoopshype, our team salary would be $75,867,728. With the luxury tax at $70 million, that would result in the spurs having to pay a luxury tax of $11,735,456 ($5,867,728 x 2).

Luxury tax is calculated as 2X each dollar over the tax threshold? It's not 1X?

[Strike]

Luxury tax is calculated as 2X each dollar over the tax threshold? It's not 1X?

Dollar for dollar. If they're $5,867,728 over the threshold, they pay $5,867,728 in luxury tax money, bringing the total bill to $81,735,456 (salaries + luxury tax).

[ElNono]

Luxury tax is calculated as 2X each dollar over the tax threshold? It's not 1X?

It is 1x...

[Blackjack]

If you're over the tax line you pay double on the dollar.

If you're below the tax line, then go over the tax line, you're losing out on a would-be ~$3.3M this year and you're paying double on the dollar.

So if you're $2M over you're paying $4M.

But if you're below the tax line, by say even $50K, then you go over $2M? You're losing the $3.3M and you're paying $4M in tax. You're essentially out $7M.

[MannyIsGod]

If you're over the tax line you pay double on the dollar.

If you're below the tax line, then go over the tax line, you're losing out on a would-be ~$3.3M this year and you're paying double on the dollar.

So if you're $2M over you're paying $4M.

But if you're below the tax line, by say even $50K, then you go over $2M? You're losing the $3.3M and you're paying $4M in tax. You're essentially out $7M.

Exactly, its necessary to not only take into account the amount you pay in a penalty but the rebate amount you miss out on. RJ was set to make about 15 mill this next year but the reality is that he was actually going to cost the Spurs closers to 22-23 million for one year.

23 million for one year or 40 million for four years is really a financial no brainier.

[ElNono]

If you're over the tax line you pay double on the dollar.

If you're below the tax line, then go over the tax line, you're losing out on a would-be ~$3.3M this year and you're paying double on the dollar.

So if you're $2M over you're paying $4M.

But if you're below the tax line, by say even $50K, then you go over $2M? You're losing the $3.3M and you're paying $4M in tax. You're essentially out $7M.

Nope. You pay 1 dollar for each dollar over the cap.

[ElNono]

http://members.cox.net/lmcoon/salarycap.htm

Look at entry #16

[Blackjack]

If you're $1 over, you're paying for that $1. But then you're also forced to match that dollar with another dollar, thus double on the dollar.

[Blackjack]

http://members.cox.net/lmcoon/salarycap.htm

Look at entry #16

I've been reading it for 2 days.

[ElNono]

If you're $1 over, you're paying for that $1. But then you're also forced to match that dollar with another dollar, thus double on the dollar.

You're paying that $1 dollar per the salary. Then you need to match it with an extra $1. The first dollar you always pay as part of the contract. So what you're paying is 1x whatever amount is over the tax line.

The previous message claimed that RJ would put the Spurs $5m over the lux tax line and the Spurs would have to pay $5m * 2 = $11m in tax. That's not correct.

[Blackjack]

You're paying that $1 dollar per the salary. Then you need to match it with an extra $1. The first dollar you always pay as part of the contract. So what you're paying is 1x whatever amount is over the tax line.

The previous message claimed that RJ would put the Spurs $5m over the lux tax line and the Spurs would have to pay $5m * 2 in tax. That's not correct.

I made no reference to his post. Only stated the facts as I know them. Back to the FAQ.

[ElNono]

I made no reference to his post. Only stated the facts as I know them. Back to the FAQ.

That's why you're the #1 poster...

[Blackjack]

That's why you're the #1 poster...

I'd be blushing if My Omnipotence would allow it.

[D-rob fan]

You're paying that $1 dollar per the salary. Then you need to match it with an extra $1. The first dollar you always pay as part of the contract. So what you're paying is 1x whatever amount is over the tax line.

The previous message claimed that RJ would put the Spurs $5m over the lux tax line and the Spurs would have to pay $5m * 2 = $11m in tax. That's not correct.

Your right, I messed up in my explanation. Spurs would have to pay $5m in tax but also pay the $5 of regular salary over the luxury tax limit. I was still thinking in these terms for explanation of the final dollars but made the mistake of saying the tax was $11 m. The end result in values still work though.

[Blackjack]

Easy way to look at it, if you're over the cap by $5M:

Owner pays the player $5M earned.

Owner pays the league $5M in tax.

It's not $10M to the league, but it's $10M out of the owners pocket. Thus, double on the dollar.

[toki9]

Thank you to everyone who clarified the lux tax rules...but in terms of comparing the Original vs New contracts, it doesn't really matter what the restructured contract may have saved the Spurs--the team is still paying the final price tag. So wouldn't an all-in-cost comparison be the simplest way of looking at it?

In other words, the remaining 1 year of the original contract would have cost $15MM (contract) + $5.8MM (Tax) + $3MM (Tax payout loss) = $23.8MM for 1 year, as opposed to $40MM for 4 years.

[toki9]

Easy way to look at it, if you're over the cap by $5M:

Owner pays the player $5M earned.

Owner pays the league $5M in tax.

It's not $10M to the league, but it's $10M out of the owners pocket. Thus, double on the dollar.

Right, double on the dollar from salary perspective, but dollar for dollar from tax perspective.

[MannyIsGod]

Thank you to everyone who clarified the lux tax rules...but in terms of comparing the Original vs New contracts, it doesn't really matter what the restructured contract may have saved the Spurs--the team is still paying the final price tag. So wouldn't an all-in-cost comparison be the simplest way of looking at it?

In other words, the remaining 1 year of the original contract would have cost $15MM (contract) + $5.8MM (Tax) + $3MM (Tax payout loss) = $23.8MM for 1 year, as opposed to $40MM for 4 years.

Isn't that what I said above?

[ElNono]

Thank you to everyone who clarified the lux tax rules...but in terms of comparing the Original vs New contracts, it doesn't really matter what the restructured contract may have saved the Spurs--the team is still paying the final price tag. So wouldn't an all-in-cost comparison be the simplest way of looking at it?

In other words, the remaining 1 year of the original contract would have cost $15MM (contract) + $5.8MM (Tax) + $3MM (Tax payout loss) = $23.8MM for 1 year, as opposed to $40MM for 4 years.

There would have been other, more expensive implications too. For example, signing Splitter and Neal would have cost 2x as much, since the Spurs would have had to pay lux tax for those contracts (about an extra $3.5m in the tax bill)

[toki9]

Isn't that what I said above?

Yes, yes, it is. Sorry for the redundancy. Missed your post.

[Blackjack]

Right, double on the dollar from salary perspective, but dollar for dollar from tax perspective.

That's why I made sure to clarify -- I wasn't thinking that it'd come off as multiplying by 2 after crossing the threshold. It's double on the dollar. Had the owner been forced to pay $5M to the player and then $10M in tax for being over $5M, that'd be triple on the dollar. Once to the player and two times to the league.