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Dan Gilbert: Luxury Tax Will Never Be an Issue

Dan Gilbert Getty Images
Getty Images

When LeBron James called Cleveland home prior to his exit in July of 2010, the Cavaliers, led by team majority owner Dan Gilbert, were frequent violators of the NBA’s luxury tax. Prior to James’ return, the league changed their rules, as collectively bargained, punishing tax-payers even more, making it that much more onerous on teams opting to put together a roster of multiple superstars. Fast forward to October 29, 2014, the eve of Cleveland’s Big Three taking the floor for the first time, and Gilbert says that despite the altered rules and his outflows in the city of Detroit, his message to fans has not changed.

“I almost think it’s kind of silly when you invest in so much into a franchise and have such high costs already,” Gilbert told WFNY in his Wednesday address of the media. “ I know it’s a lot of raw dollars by itself, but relative to everything that’s invested… I’m always a little surprised when owners of franchises stop right there. To me it’s like you’re getting to the 2-yard line and you’re done. It’s not smart business/smart financially.”

Gilbert’s comment has been viewed by some to be a verbal sub-tweet aimed at Miami’s Mickey Arison who used the amnesty clause last summer on sharp-shooting friend of LeBron, Mike Miller. The Heat opted to keep the less-expensive forward Shane Battier and were effectively demolished by the San Antonio Spurs in the NBA Finals.

The Cavaliers will undoubtedly benefit from the impending hike in the NBA’s salary cap, but with Kyrie Irving locked up long term, the team will have to extend longer-term deals to James, power forwards Kevin Love and Tristan Thompson (who Gilbert reiterated that the team wants to re-sign) as well as rumored interest in extending veteran center Anderson Varejao.

The amount of tax a team pays depends on the season, the team salary as of the team’s last regular season game, and whether the team is a “repeat offender” where costs rise exponentially. In 2011 the NBA introduced another level above the luxury tax line known as the “apron”. This is a line $4 million above the luxury tax line. If a team’s payroll is above this level, they essentially lose access to several salary cap exceptions. If a team is under the apron but uses certain salary cap exceptions, they will be hard-capped at the apron until the following June 30. Specific to the Cavaliers, hitting the salary apron would prevent them from trading center Brendan Haywood’s expiring contract in addition to preventing them from using their mid-level exemption in 2015-2016.

In July, 2012, two years after James had left for Miami, the Cavaliers were still among the top six in the NBA in luxury tax dollars paid. With James and a few of his friends back in the fold, it appears this will become common ground.

“Clearly, the cap will be going up these next few years,” said Gilbert. “But that message is still there. When the decisions are ours and they’re regarding financials, it will not stop us from being able to deliver a championship-caliber basketball team.”

 

  • RGB
  • BenRM

    There was some belly aching on the radio about Flash Seats yesterday (perhaps deservedly so) and about the Cavs “double dipping” on ticket sales.

    My response (alone in my car was) as long as Dan doesn’t care about the luxury tax, I don’t care about Flash Seats.

  • cmm13

    Dan (2012) — “HIGHER PENALTIES ON SPENDING ABOVE THE LUXURY TAXES NOW!! THESE SUPERTEAMS WILL RUIN THE LEAGUE!!!!”

    Dan’s Assistant (Spring of 2014) – Mr. Gilbert, Maverick Carter on line 1.

    Dan (2014) – “I’LL SPEND A TRILLION DOLLARS TO KEEP MY SUPERTEAM TOGETHER! ”

    I. Love. It.

  • cmm13

    The dude balancing the “free bands” on his head should be the halftime act for every game.

  • Vega
  • mgbode

    if the market value for the seats is higher than the team is selling them for, then shouldn’t they get parts of those profits? why should it be some generic investor who won’t put that money back into the team?

  • mgbode
  • BenRM

    That’s a reasonable argument I could find totally convincing.

    But I can also understand the POV of the long-time season ticket holder who loyally suffered through the Non-Bron years and wouldn’t mind being rewarded with a few bucks this year.

  • mgbode

    the season ticket holder still does make money. Flash Seats only charges those buying the tickets. They just take a portion of the pie back to the team rather than StubHub, TiqIQ, etc.

  • BenRM

    Some callers suggested that, in some transactions, both the buyer and seller give a chunk of cast to the team. I’ve never used it though, so I’m just going with what was said.

    Either way, I don’t care as long as Dan keeps paying for OMGSTARS!

  • mgbode

    I went to the flashseat FAQ page and it suggested only the buyer paid to the team and it was setup in a similar manner to all the other ticket exchange programs.

    http://cavs.flashseats.com/FAQsDetails.aspx?ss=8&a=1

  • BenRM

    That seems pretty reasonable then…I’m not sure what some of those dudes were talking about.

  • Harv 21

    great episode

  • Harv 21

    This sounds decisive but I have doubts. Mainly because Dan cannot decide on the facial hair thing. He’s suddenly all over the map: clean shaven, tweedy short beard thing, goatee … everything ok, Dan?

  • Jason Hurley

    He realized it was too early for a playoff beard. If he kept going, he’d look like Gandalf the Rich by May.

  • The_Real_Shamrock

    Awesome episode

  • RGB
  • scripty

    Cavs win it all this year. I might not be able to afford these next year!

  • C-Bus Kevin

    The part I love best is the willingness to openly say that they want to resign certain players. Most owners feel like they’re giving up leverage by being so candid, I imagine, but Dan’s all like, “Yes…I fully intend to keep our best players. Cost isn’t an issue.”

    How the other half lives, indeed.