Why Avoiding The Tax Is A Luxury

http://espn.go.com/blog/boston/celtics/post/_/id/4710949/why-avoiding-the-tax-is-a-luxury


Why avoiding the tax is a luxury
February, 18, 2014
FEB 18 4:00 AM ET
By Chris Forsberg | ESPNBoston.com



It should come as no surprise that Boston Celtics ownership would be willing to pay luxury tax this season as the team has never been afraid to spend with the aim of being competitive.

The Celtics are roughly $800,000 away from this season's tax line of $71.75 million as Thursday's trade deadline approaches and have operated with a goal to stay below that line. Why? The benefits are two-fold.

First, Boston would stand to collect on the money spent by the league's taxpaying teams. With the Brooklyn Nets currently on pace for an $80+ million tax bill -- thanks in part to the salary the Celtics shipped them last summer -- the league's tax collection will be as robust as ever. Look at it this way: Last season, the league collected $70.6 million in tax and 50 percent of that was split between the 24 non-taxpaying teams giving each team a payout of $1.47 million (the Celtics were a taxpayer, spending $1.2 million over the line last season).

According to team salaries logged by ShamSports.com, five teams are currently on pace to pay tax this season (though the Lakers could get below that line if they move Pau Gasol before the deadline). A new incremental tax rate is set to drive bills up this season, particularly for big spenders like the Nets and Knicks. At the moment, if you include the Lakers, the five taxpaying teams are on pace to pay roughly $150 million. Half of that total (the max that can be distributed to non-taxpayers, according to Larry Coon's CBA FAQ) split between the 25 non-taxpayers leaves each team with a payout of roughly $3 million per team.

What's more, avoiding the tax this season would prevent Boston from paying a repeater penalty next season when incremental tax rates jump an extra dollar for those teams that have paid tax each of the last three seasons. That doesn't sound like a steep jump, but considering the Celtics could be back in the tax next season, that could mean big savings for being responsible during this transition season.

Now, if an opportunity presented itself to attract an established talent at this year's deadline -- even at the expense of straying over the tax line -- Boston would have to consider it in the interest of accelerating through this rebuild. But the preference undoubtedly remains to stay south of that tax line.



bob



.

It's nice to read that the Celtics' owners might be amenable to paying a luxury tax for good reason. However, especially considering the ramifications of the repeater penalty, I won't be holding my breath for it to happen.

Sam