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Dan Gilbert: Luxury Tax Will Never Be an Issue

Dan Gilbert Getty Images
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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.”