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#pounditSunday, January 23, 2022

Tristan Thompson contract likely being held up because of luxury tax

Tristan Thompson

One of the biggest questions in the NBA this summer is what will happen with Tristan Thompson.

The Cavaliers forward rejected a $52 million contract extension during the season and is widely believed to be seeking a max contract. The latest report said there was a stalemate in negotiations between the two sides, and that’s not because the Cavaliers do NOT want Thompson; they do. One major stumbling block has to do with the luxury tax.

As Basketball Insiders’ Steve Kyler explained in a post published on Tuesday, Thompson’s side pulled away from a five-year, $80 million contract offer after seeing what some of the other top forwards were getting in their contracts. Now the issue is that Thompson is going to cost the Cavs triple what they sign him for because they are already over the luxury tax.

Kyler says the Cavaliers already have committed $88.631 million in guaranteed salary to their current roster, which is $3.891 million over the $84.74 million luxury tax threshold. The corresponding tax bill is $5.836 million. That means they will be taxed heavily on every penny used to sign anyone else, such as Thompson, J.R. Smith and/or Sasha Kaun.

For instance, if Thompson signs a qualifying offer for $6.77 million, the Cavs would face a $12.085 million tax bill, meaning Thompson would cost them $18.862 million.

If they pay Thompson the full max amount, that’s where things get really crazy.

At $16.407 for Thompson, the team would owe just over $46 million in taxes, meaning Thompson would cost them just over $62 million. This is the exact sort of scenario the Brooklyn Nets faced when Mikhail Prokhorov declared he was going to compete regardless of the cost. The luxury tax bills began adding up, and the team recently shed many big contracts.

To me, the scenario that makes the most sense is that the Cavs sign Thompson to a qualifying offer, bite the bullet on the luxury tax this year, and then give him big money as an unrestricted free agent next year.

Having LeBron James on your roster is big business and costly, but if you want to keep him happy, paying Thompson a truckload is one of those costs.

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