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Cavs Trade Is A Heavy Price For Flexibility And Tax Savings

This shouldn’t have come as much of a surprise, but no one was willing to give the Cavs anything of value for the non-guaranteed $10.5 million contract belonging to Brendan Haywood. Essentially, Cleveland had to pay the Trail Blazers to take him.

Cleveland will get a $10.5 million trade exception (“TPE”) that will allow them to trade for a player earning up to the TPE without sending a player back. A useful bit of future flexibility, but one needs to remember the Cavs would be going after a player another team doesn’t want who can’t trade for anything better than getting back a TPE (just like the Cavs did with Haywood.) One also needs to remember that if Cleveland signs everyone they are expected to at the dollars anticipated, the luxury tax penalty for using the Haywood TPE is likely to be over $5 per $1 or to put it another way, adding anther $10 million player after signing everyone else probably costs over $50 million in luxury tax (and that’s completely irrational.)
The Cavaliers also sent Mike Miller to Portland for a $2.85 million TPE, but as Miller isn’t the asset he once was, they also had to include a couple of second round draft picks as compensation for a player that is likely to be waived later. It would be fair to assume the number of draft picks also take into consideration the Haywood trade.  

In Cleveland these days it is pretty safe to assume LeBron James is on board with both of these trades. Miller was only on the Cavs because James wanted him to be and the trade got Miller a nice cash bonus and the possibility of some more extra cash if he gets waived and can sign for the veteran’s minimum elsewhere.

However, don’t assume the Cavs were really doing any favors for James this time. The Miller trade probably knocks well over $10 million off the Cavs 2015-16 payroll costs. If anything, Brian Windhorst’s estimate of Cleveland’s expected savings is light.  

The Cavaliers executives remain a long ways from taking the rest of the summer off. They still have some very important and very expensive decisions to make about how to resolve the situation with restricted free agent Tristan Thompson. Thompson wants a max deal, but the contract plus the luxury tax implications would make him the most expensive backup signing in NBA history.

There should be no misunderstanding of what just happened, the Cavaliers had to give up something for nothing, real assets to move out the contracts of Haywood and Miller, the fun in Cleveland continues.



Stephen_Brotherston_insideStephen Brotherston covers the Toronto Raptors and visiting NBA teams at the Air Canada Centre and is a member of the Professional Basketball Writers Association.



Tristan Thompson - croppedCan The Cavaliers Afford $70m To Re-Sign Tristan Thompson?

With a payroll over $81 million in 2014-15, the Cavaliers are a luxury tax team and they’ll be a tax team again in 2015-16. It’s worth keeping in mind that if they can’t get under the tax line in 2016-17, they’ll pay the dreaded repeater tax and if Griffin does what he says he will this summer, that’s a very real possibility.



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  1. Pingback: Luxury Tax Rules: Cavs Paid Portland To Take Haywood And Miller

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