How Eric Gordon’s waiver saves the Clippers $110 million in tax payments

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By Webdesk

The Los Angeles Clippers waived guard Eric Gordon on Wednesday, an odd move in the context of what they gave up trying to get him. Less than five months ago, they traded guards Luke Kennard and John Wall for Gordon, giving up trade rights that allowed the Houston Rockets to move from No. 30 to No. 20 in last week’s draft and select forward Cam Whitmore. .

Why did they do this? Save money. Shortly after the move was made, That’s what ESPN’s Bobby Marks noticed that it lowered the Clippers’ projected tax bill from $169 million to $59 million.

How is that possible? The Clippers, eternal big money lenders, targets of the new the hard roster structure restrictions of the collective labor agreement, are included in the repeat load. With Gordon’s contract on the books, they would have had a total payroll of about $204 million, which is $39 million more than the $165 million tax threshold.

For every $5 million in salary above the tax level, the tax rate rises. For repeater teams, the tax rates are significantly higher.

Warning: It’s about to get extremely mathematical. The first $5 million above tax would have cost the Clippers $12.5 million ($2.50 per dollar), the second $5 million would have cost them $13.75 million ($2.75 per dollar), the third would have cost them $17.5 million ($3.50 per dollar). , the fourth would have cost them $21.25 million ($4.25 per dollar), the fifth would have cost them $23.75 million ($4.75 per dollar), the sixth would have cost them $26.25 million ( $5.25 per dollar) and the seventh would have cost them $28.75 million ($5.75 per dollar). Their last $4 million above tax would have cost them $25 million ($6.25 per dollar). Add all that up and it’s $168.75 million.

Wipe Gordon’s salary off the books, however, and the Clippers are just $18 million above the tax threshold. That means removing a large part of the previous paragraph. As it stands, the first $15 million on tax will cost them $43.75 million ($12.5 million + $13.75 million + $17.5 million), and the last $3 million on tax would cost them $12.75 million. That works out to $56.5 million.

(Yes, there is a slight discrepancy between this figure and the $59 million mark Marks tweeted. The actual number is calculated using the Clippers’ precisely salaries — For example, Gordon would not earn exactly $21 million, but rather $20,917,902 per Spotrac.)

Between the reduced tax bill and Gordon’s salary, this one transaction could save the Clippers more than $130 million next season. However, how deep they’ll be in tax territory depends on what else they’re up to this summer. They obviously have no caproom to speak of, but they could theoretically re-sign backup center Mason Plumlee with his Bird rights and re-sign guard Russell Westbrook with non-Bird rights. There may also be trades and Brandon Boston Jr.’s contracts. and Jason Preston are not yet guaranteed.

Losing Gordon’s salary can only be to make it more attractive to add salary elsewhere. It could also lead the Clippers to fall below the “second platform,” which is set at $17.5 million above the tax level. It’s weird to see a win-now team cut off a recently acquired veteran who played big minutes at the end of the season, but this is exactly what the new CBA was designed for.

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