COVID has made a big mess of the salary cap in every sport, so let’s take a look at where the Hawks stand after their offseason shopping spree. Atlanta added a little over $70 million in salary, including rookies, and still have extensions for Trae Young and John Collins looming. Is it possible to bring both of those guys back?
Look, the way the NBA collective bargaining agreement works is downright weird; there are so many intricacies to it; I’ll just be looking at base salaries and what it means going forward. They used their MLE on Kris Dunn, so that’s a tool that’s already been utilized to help skirt the hard cap.
Right now, Atlanta’s actually looking just fine. According to an estimate by Spotrac, Atlanta is sitting at about $113 million in salary for this season — not including two-way deals signed by Skylar Mays & Nathan Knight. That number only drops to around an estimated $100 million in 2021-2022. The only contracts coming off of the books are Brandon Goodwin, Solomon Hill, Tony Snell, and of course — John Collins. A lot of fans are split on Collins, but retaining him is imperative. There are team options on De’Andre Hunter, Cam Reddish, and Kevin Huerter that are sure to be exercised as well. Luckily, the Hawks have multiple tools to navigate the salary cap. Unlike the NFL’s hard cap system, signing your own players is much easier in the NBA.
As it stands, there’s a whopping 19 teams (including the Hawks) over the NBA’s projected $109 million salary cap on paper in 2020-2021. The most notable is the Golden State Warriors, paying a massive $166+ million bill in salary. How could they even do that, you ask? For starters, Bird Rights help a LOT.
To put Bird Rights in layman’s terms, it’s a signing exception the NBA implemented back in the ’80s (named after Larry Bird) to help teams keep the players they drafted or signed for multiple years. If a player spends three consecutive years without leaving an NBA team, they get Full Bird Rights. There are also Early Bird rights to help iron out “Super-Max” deals with players like Donovan Mitchell and Jayson Tatum. Both exceptions can help Atlanta.
So what do these Bird Rights mean for John Collins? Bird Rights allow teams to pay a player 120% of their previous salary to re-sign. With Early Bird Rights, that number rises to 175% of 104.5% of an average league salary, whichever is higher. However, with Collins, Atlanta would likely be looking to use his Full Bird Rights Exception. This allows Atlanta to pay Collins up to 35% of the cap to retain him. Atlanta would be paying the luxury tax, but I’ll get to that in a moment.
With Atlanta’s player salaries currently at ~$113 million, they could offer Collins up to around $39.6 million per year if they wanted to. That number seems more likely for Trae Young’s looming extension, but Atlanta can still give Collins a nice payday and skirt the hard cap. Looking at a contract similar to De’Aaron Fox & Jayson Tatum’s new deals, they received five-year, $163 million contracts with incentives to rise up to $195 million. I like this framework for Collins; I think he can play to the money he wants. I think he’s worth close to that money, but something in the $25-$30 million per year range laced with incentives seems a lot more reasonable. However, $163 million over 5 is within Atlanta’s Full Bird Rights exception if they choose to pay him big money. Looking at the Golden State Warriors, they have kept multiple players using Bird Rights:
Steph Curry — $43.06 million
Klay Thompson — $35.36 million
Andrew Wiggins — $29.54 million
Draymond Green — $22.25 million
While Wiggins was traded, the Hawks have similar rights over Clint Capela. This is largely irrelevant for now, considering he’s signed until after 2022-2023, but it benefits Atlanta’s overall sheet. Now, onto that pesky Luxury Tax. The luxury tax line is at around $132 million projected, and Atlanta is still roughly $17 million below that.
Any team that spends over the hard cap has to pay the price. Quoting this NY Daily News Article:
Tier 1 of the NBA’s luxury tax rule taxes teams $1.50 for every dollar they exceed the luxury tax up to $5 million. That $4.97 million over the tax line really cost the Trail Blazers $12,425,000 when you account for the $7.45 million tax bill tacked on top.
That’s just Tier 1. The luxury tax is a progressive tax, meaning that for every dollar over the line between $1 and $4,999,999, teams are taxed $1.50. Then from $5 million to $9.99 million, they are taxed $1.75 for every dollar spent in that bracket.
The NBA’s luxury tax delivers a stiffer penalty as teams continue spending. Exceeding $10 million beyond the tax, normally costs $2.50 for every dollar up to $15 million, $3.25 for every dollar between $15-$20 million, and $3.75 for every dollar between $20-$25 million.
Call those Tiers 2, 3 and 4. Additional tiers are created for every additional $5 million spent into the tax, increasing the payment by 50 cents for each new tier created. (Example: Tier 5 luxury tax spending would usually cost teams $4.25 on the dollar.) The tax does not include the value of the contract itself.
Repeat taxpayers also face an increase every season. While the NBA is softening on this for 2021 due to COVID implications, for example, those same Warriors (via Forbes):
Add in the TPE and taxpayer Mid Level Exception (MLE), expected to be around $5.7m, and their salaries jump to around $177.5m. That is $45m over the tax threshold, meaning their salary tax bill jumps up by $100m to a whopping $163.75m. Overall they’d be on the hook for around $341m if they use all the tools they can to build a championship contender.
That’s insane money, and the Hawks would be nowhere near that. However, Atlanta does have the resources at their disposal to extend John Collins after this year and Trae Young going forward. Keeping the homegrown talent is vital, and in a season in which expectations are skyrocketing for Atlanta spending going forward will be too. Ownership has made it clear they want to build a winner, and they’ll hopefully be paying for one soon enough.