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Assessing the Thunder's luxury tax situation

The Thunder is closer to dropping below the luxury tax line than it has been since the tax spike in 2016-17. But that doesn’t necessarily mean it will get there.

With the trade deadline two weeks away, one underlying factor will put Thunder front office decisions in perspective: The franchise is motivated by sustainable success. Especially as it heads toward a rebuild, the Thunder won’t jeopardize its long-term plan for a short-term payoff.

Thunder general manager Sam Presti said as much in his July editorial in The Oklahoman.

“In order to build — and then sustain — a truly great basketball team, it requires a method,” Presti wrote. “This method is not guesswork or a convenient message that miscasts other’s good fortune as a repeatable skill. To build true excellence in any industry, and then sustain it, requires trading on time and playing the empirical odds. This will require strategic discipline and thoughtful patience, but these are values our organization has always held high. That’s how longevity is earned. It is important to remember that.”

Yes, savings are part of the franchise’s goal as it enters a new era. They are crucial to the “replenish” stage in Presti’s “reposition, replenish, rebuild” mantra. So, if the Thunder sees a route to drop below the tax, which doesn’t require forfeiting valuable assets – whether that be via trade or a buyout – it will likely take it. But OKC isn’t clambering to get below the tax for two reasons: The Thunder has already drastically cut expenses, and the financial incentive continues to drop as other teams cut their luxury tax bills.

When the Thunder’s 2018-19 season ended in a first-round playoff exit, the organization planned to continue spending well above the luxury tax. Not only was it expecting to pay Paul George and Russell Westbrook over $71 million combined in the coming season, but OKC was prepared to show the pair its commitment to winning, through spending.

Frugality early in the Thunder’s OKC tenure — and Westbrook and Kevin Durant’s careers — allowed the small market franchise to afford more experienced and expensive teams later on.

Now, because of the Thunder’s extreme spending in recent years, it is subject to the repeater tax. Trading Paul George ($33 million salary this season) to the Clippers for Shai Gilgeous-Alexander ($3.95 million) and Danilo Gallinari ($22.6 million) began the work of cutting the Thunder’s luxury tax bill. Then, by trading Jerami Grant ($9.35 million) to the Nuggets for a 2020 first round pick, OKC saved another $39 million in salary and luxury tax spending. OKC now sits about $920,000 over the tax.

After already achieving tens of millions of dollars of savings, shedding less than $1 million dollars to drop below the tax is less urgent. No matter what happens this year, the Thunder will likely be below the tax for years to come.

Which brings us to Reason No. 2. Other teams aren’t spending much above the luxury tax this year either, which means the distribution to non-tax-paying teams has decreased.

As of Tuesday, the projected distribution of $680,000 to the 25 teams under the luxury tax is the lowest since the tax spike of 2016-17, according to ESPN front office insider Bobby Marks. If the Thunder maneuvers under the tax line, the distribution from the tax fund will decrease even more. That all but removes the additional financial incentive to drop below the luxury tax limit.

Since the Thunder traded George to the Clippers this summer, the team has been open to trade calls. With a mix of proven veterans, expiring contracts, and veterans on expiring contracts, the Thunder has assets that might be enticing for playoff contenders.

OKC could even add to its tax bill. Teams around the league have been surprised at the Thunder’s “willingness to absorb their unwanted salary in potential trades,” The Athletic’s Shams Charania reported in December.

That aligns with the Thunder’s future-oriented thinking and track record of creative trades (see the trade that sent Chris Paul, two first-round draft picks and two pick swaps to OKC in exchange for Russell Westbrook). The Thunder could use a trade exception to keep its current team intact and stockpile any additional assets it receives for taking on a bad contract.

That being said, multiple parties are involved in trades and buyouts. If potential trades allow the Thunder to maintain or add to the bright future it has created with prospects and draft assets, this could be a busy trade deadline for OKC. If not, the Thunder’s patience can create leverage.

“There will no doubt be criticisms,” Presti wrote in July, “much of which we could all recite in advance right now. It is the job of the organization to resist those shortcuts, accept that criticism, and keep us deeply committed. If you want an exceptional outcome, you must be willing to be the exception.”

The Thunder had a similar approach to its first rebuild – which was expedited when OKC selected three future MVPs in consecutive drafts. But in this new era of Thunder basketball, Feb 6. will be the first test of OKC’s commitment to the process.

***

Thunder at Magic

When: 6 p.m. Wednesday

Where: Amway Center, Orlando

TV: FSOK (Cox 37/HD 722, DirecTV 675, U-verse 751/1751)

Radio: WWLS-AM 640 / 98.1 FM

Related Photos
<strong>Will Oklahoma City Thunder general manager Sam Presti make any roster moves before the trade deadline in two weeks? [Chris Landsberger/The Oklahoman]</strong>

Will Oklahoma City Thunder general manager Sam Presti make any roster moves before the trade deadline in two weeks? [Chris Landsberger/The Oklahoman]

<figure><img src="//cdn2.newsok.biz/cache/r960-b2a576f3010ca6c6e2bed92866b132a5.jpg" alt="Photo - Will Oklahoma City Thunder general manager Sam Presti make any roster moves before the trade deadline in two weeks? [Chris Landsberger/The Oklahoman] " title=" Will Oklahoma City Thunder general manager Sam Presti make any roster moves before the trade deadline in two weeks? [Chris Landsberger/The Oklahoman] "><figcaption> Will Oklahoma City Thunder general manager Sam Presti make any roster moves before the trade deadline in two weeks? [Chris Landsberger/The Oklahoman] </figcaption></figure>
Maddie Lee

Maddie Lee followed an NBA team from Seattle to Oklahoma City, she just took a 10-year detour in between. Lee joined the Oklahoman in October 2018 as a Thunder beat writer, fresh off a stint in Oxford, Miss., where she covered Ole Miss for the... Read more ›

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