Even if Houston, NO, Miami, and Phoenix were to all get under the luxury tax this year (and let’s assume the numbers given above are reasonably accurate), the 1/30th share each team would receive would drop by less than $600,000. So in the example deal for T-Mac, the Wolves would essentially be ‘buying’ a first round pick for less than $600K in lost luxury tax share. Obviously Houston probably benefits the most ($13 million is a lot of money), so the question is how much is $13 million worth to the Rockets?

The rumored deal between Sacramento and Philly involving Dalembert strikes me as a trade already motivated by this kind of financial thinking, at least from Philly’s point of view. I wonder if we’ll see deferred first rounders thrown in as sweeteners to make these deals happen?

The salaries should be accurate. Eric, you’re correct that the lux tax only applies to what a team pays for vet min players, but the site I used is using that information in their lux tax caluculations. You can verify this by looking at MIN’s vet-min free agent, Jason Hart.
NBA rules dictate that the most a team can charge for a 1st round pick is $3 million dollars in cash. When an owner has sold one, these have all been late picks, and no owner has received back less than the full $3 mil. This doesn’t allow us to set the price of a late pick, but we know that it is worth at least $3 mil.
In any event, $3 mil in cash can be added to any deal, so in the McGrady example, the Wolves could take on $4.5 mil in 2009-10 salary, and receive $3 mil in cash plus a pick, which would probably be a good deal for both teams. And just to be complete, I should mention that adding a 2010 pick also adds a cap hold that reduces our cap space, so requests for 2011 picks may not be unexpected.
I’ve enjoyed the discussion of pro-rating in the responses, but I left it out of the article to avoid needlessly complicating it for readers who may not be familiar with the luxury tax at all. You guys are correct that the salary is pro-rated, but the luxury tax is based on the team’s salary on the last day of the season. Therefore a swap of expirings to create a TPE may be more likely ar the deadline.

Utah has one of the smallest markets in the NBA, so being $11.8 mil over the lux is difficult to absorb. Last summer, they were in a difficult situation, not knowing whether Boozer or Okur would stay, and wanting desperately to hold onto the promising Paul Millsap. They backed into having all three. A friend of mine who is one of the many rabid Jazz fans thinks Boozer will be dealt as well, but as he puts it, “traded in a deal disguised as a salary dump.”

I also agree that we could see a healthy McGrady dealt. While owner Leslie Alexander spent some money this off-season, he has one of the lowest net worths of any NBA owner. For comparison, Forbes had him at $80 million, Glen Taylor at $2.1 billion, and of course, Microsoft’s old Paul Allen is at $20 billion in Portland. If you’re debating a deal that saves you $13.2 mil and you’re only worth $80, you have to have a lot of confidence that McGrady is going to help your team sell a lot more tickets and merchandise. With Yao Ming out, I think the Rockets ceiling isn’t nearly as high, and there will always be questions about the reliability of McGrady’s health. On top of that, even without expensive Yao Ming and McGrady, Rockets still have an exciting and successful young team for their fans.

I’m planning on future articles looking at market size and owner net worth.

I think DK has shown a far more detailed and nuanced grasp of the salary cap than the previous regime, and I would also point out that it takes two to tango, er, trade.

Re: the Atkins bit, we’ll never know the backstory on that one. I think it’s true that teams don’t dump salary before a season starts (unless undergoing wholesale rebuilding, ahem), but I also wouldn’t be surprised if part of taking the savings ourselves was a political/business move on Kahn’s part to appease Taylor for the losses at the gate the Wolves are taking this year. If Kahn new this team would look awful and people won’t come to Target Center, what better way to keep the owner happy than to save him a few million dollars in the short term?

Along those lines, I wouldn’t object to trading for TMac (assuming other deals don’t develop). At worst he doesn’t play and we still have cap space. More likely is that he plays a bit and helps develop interest in the team for the short term. And at best he shows that he’s fully healthy again and we’ve got the inside track on signing him again. Have to admit, a healthy TMac would look pretty good on this squad (key point—healthy).

Model franchise in so many respects for teams like ours, but are the Rockets really so deep that saving on Pops’ salary isn’t a sizable factor in letting him go? He seems like the kind of guy the Rockets would go after-a rough around the edges player who could develop into something very useful later.

If the Rockets can eat TMac’s salary, then why not hold on to a prospect like Pops? I guess I’m not questioning the move per se, just the sale of it to us rubes. Smells like either a salary dump or the guy just can’t play. More’s going on if Morey can’t get value for him. Trace the value, find the reason for the release, ergo Pops was a salary dump (as Toronto has jumped on picking Pops already, so somebody thinks he can still play).

I’m happy to hear from fans from other teams, and the Wolve’s upcoming game with the Rockets was a key reason I featured them in my discussion of luxury tax issues.

I agree with you that the Rockets benefit from being the fourth biggest market in America, and I mentioned that Alexander spent money this summer. However, regarding a T-Mac trade, just because you “have” money doesn’t mean you would “waste” the money. The Houston Rockets want to win and produce an entertaining product, but thet are still a business with a bottom line. If a trade like that is on the table, the Rockets front office needs to decide whether an injured Tracy McGrady is still worth $13.2 million to the team as an incremental decision. Selling a protected pick for this price would be a no-brainer, and the expirings are just as tradable as McGrady’s .. moreso because salary-matching McGrady’s big contract would be difficult.

Houston is fortunate because for many teams, they wouldn’t have a choice. A frugal, smaller-market team like Milwaukee might have to accept a trade that nets them $13 million dollars. A win-now contender with little youth and a short window might be forced to keep McGrady, eat the salary, and pray he can come back at 100% sometime in the season to put them over the top. The Rockets, with their revenue-generating power and a pretty nice team even without McGrady, have the “luxury” of making the decision for themselves.

I don’t think the spending in the off season to buy the picks that brought Budinger and Taylor to the team counts against the cap, only the salaries of those two players.

They might be wrong. It appears our Timberwolves are ranked 8th. That can’t be right, can it?

They aren’t that far over the tax line that if Yao’s insurance alone would actually drop the Rockets in salary owed than it would also drop the Rockets out of luxury tax.