The Boston Celtics and the Repeater Tax

Have you ever been having a great day already and you have even more to look forward to later, but there is something nagging at you in the back of your brain? That something isn’t quite enough to ruin your day, but it’s a kind of constant worry that’s just sort of floating around the edges your enjoyment. This is sort of the position the Boston Celtics are in right now.

Boston had a great season in 2018, and there is even more excitement in store for 2019. The team should be back to full health, with Kyrie Irving and Gordon Hayward joining the group that came within one win of the NBA Finals. Yet, there is this constant worry about the luxury tax, especially the more punitive repeater tax. It’s not going to ruin the upcoming season, but it is something nagging at the back of Celtics fans’ brains.

CelticsBlog already covered the prospects of Boston being a tax team in 2019. It’s somewhat likely that Danny Ainge and Celtics ownership won’t be able to duck paying the luxury tax if they keep this group largely intact. Unless they let Marcus Smart walk or Smart simply signs his qualifying offer, Boston will probably finish the year over the tax line. This would mark the first time the Celtics have paid the tax since 2013, the final year of the Paul Pierce/Kevin Garnett run. Boston dropped out of the tax picture after trading Pierce and Garnett to Brooklyn that summer, and the team hasn’t been back in position to pay the tax since then.

Being a champion and paying the luxury tax generally go hand in hand. Since 2003, 11 of the 16 champions have paid the tax (h/t to Mark Deeks of ShamSports for some of the figures). The only title teams to avoid paying the tax are:

· 2005 San Antonio Spurs – always well run, with players taking less than max deals to keep the team together

· 2006 Miami Heat – aided by Dwyane Wade still being on his rookie-scale deal

· 2014 San Antonio Spurs – See above

· 2015 Golden State Warriors – benefitted by having Stephen Curry on a team-friendly deal, as well as Draymond Green and Klay Thompson on their rookie deals

· 2017 Golden State Warriors – benefitted from the cap/tax spike that allowed them to fit in Kevin Durant and also avoid being taxpayers

As you can see, you either need to be very well run or lucky to avoid the tax. And it’s just as much the second as it is the first.

If the Celtics want to bring Banner 18 to Boston, they’ll probably need to be a tax team—if not in 2019, sometime in the next few years. While there are dreams of shipping out high-priced vets in trades that bring back great young players on value contracts, those aren’t really realistic. For one, teams that are young and turn the roster over rarely win the title. Second, Ainge is good, but asking him to keep winning every trade is a bit much.

Celtics majority owner Wyc Grousbeck recently said “We’re hoping to pay for performance. We’re prepared to do whatever is takes to win again”. Celtics fans have no reason to doubt Grousbeck on the willingness to spend. Ownership paid the tax for five straight seasons from 2008 through 2013 to keep the Pierce/Garnett window open for as long as they could; they paid over $47 million in tax alone, on top of regular salary, to do so. The Celtics leadership group, from Grousbeck to Ainge to Brad Stevens, understands that to win titles you have to pay for it.

Sure, there are moves the Celtics could make to avoid being payers, as outlined in the 2018-19 cap/tax preview. The challenge is that doing so will cause the team to dump valuable depth pieces, be they Smart, Aron Baynes or Marcus Morris. Given their history, Boston is unlikely to do so just to avoid spending some tax dollars.

But what about down the line? Paying the tax in 2019 is one thing. But in the summer of 2019, Irving is due a new deal. Irving made it clear he won’t sign an extension this summer, which makes sense as it could cost him close to $80 million to extend versus what he could earn by signing a new contract next summer. That same offseason, Jaylen Brown is eligible to have his contract extended (kicking in with the 2020-21 season), and Al Horford can opt out of his deal as well. Jump forward one year and Hayward can opt out while Jayson Tatum is eligible for a contract extension.

The NBA is a time loop when it comes to managing a cap sheet. Someone always needs a new contract. There are options and guarantees and draft picks and everything else. Good teams have a long-range view, but you can only plan things out so far. Because of the nature of NBA deals, with no contracts longer than five years, things re-set fairly quickly. This feature makes the hand-wringing about the repeater tax a somewhat nonsensical exercise.

First of all, there seems to be a fairly big misunderstanding about the repeater tax and how it even works. The repeater tax doesn’t kick in if you are a tax team in back-to-back years. NBA teams are only subject to the repeater tax if they’ve been a tax team in at least three of the preceding four seasons. That means Boston would have to pay the tax in three out of four years from 2019 to 2022 before being hit with the repeater tax in 2023. Sure, the clock starts in 2019 if the Celtics are a tax team. But so much will change between 2019 and 2023 that it is nearly impossible to predict where things will land.

What makes it impossible to predict? Look at everything that is still to come over the next few years. Between contract options, free agency, extensions and drafts, there is almost no way the 2023 Celtics will look like they do right now. Heck, in 2017-18 they barely looked like the team that ended the 2016-17 season, and that only took Ainge a couple of months to pull off.

Beyond that, the cap and tax will undergo changes. As of now, both are projected to keep rising for the foreseeable future. There aren’t any major spikes built in (like in 2016), but there are some decent-sized jumps projected. Those jumps will keep giving teams some buffer, as signed contracts won’t change as the cap/tax rises.

Finally, the NBA and NBPA have a mutual opt-out in 2023. If history tells us anything, one side or the other will exercise that opt-out. We can only hope it plays out more like 2017, with a relatively quick and harmonious resolution than in 2011, with a lockout and some ugly and acrimonious back and forth. The impact to the Celtics is that just as they would be subject to the repeater tax, the entire financial structure could be changing.

Hopefully that assuages some of the worry of Boston breaking up the band before they even really have that first hit. The cap, the tax and the repeater tax are worth monitoring, as every ownership group has their limits. Even Joe Lacob of the Golden State Warriors has said the team is starting to monitor things like the tax and the looming repeater tax. But it is important to note that is only after three championships in four years and still isn’t enough of a concern to break up their juggernaut just yet.

Take Grousbeck at his word. Boston will pay the tax for a title team. They’ve done it before, even extending that window for five years, as Ainge and Doc Rivers squeezed blood from a stone with that Pierce/Garnett group. This Celtics team is younger and poised to have an even longer window of contention. Ainge and ownership aren’t going to break that up over cost concerns. After all, what’s a few (read: tens of) million dollars between friends?