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John Schuhmann

Under the new CBA, Orlando doesn't necessarily need a sign-and-trade to move Dwight Howard.
Nathaniel S. Butler/NBAE via Getty Images

New CBA rules call for careful planning at trade deadline

Posted Mar 14 2012 12:20PM

With the NBA trade deadline coming next Thursday at 3 p.m. ET, there are plenty of rumors out there on the interwebs to get your juices flowing. But even though there are several teams in need of a shake-up, it's difficult to determine just how much movement there will be.

One reason we might see a quiet deadline is that teams are still getting a handle on the new collective bargaining agreement, which was ratified less than three months ago. The new CBA both adds and alters a few parameters that teams have to work under when making deals.

Here's Mavs owner Mark Cuban, from a conversation with ESPN's Bill Simmons at this weekend's Sloan Sports Analytics Conference in Boston. Cuban was explaining his decision not to re-sign Tyson Chandler to a lucrative contract this past offseason, but his reasoning can certainly be applied to trades and free agency going forward...

"Because of the new set of rules, there's going to be a different market for pricing players. And when there's a different market for pricing players, you've got to introduce a different methodology for building a team. And you can't just use the same approach that we've used in the past."

Here are the most important changes to the rules, and how they might affect deadline movement...

A more punitive tax is coming

Both this season and next season, the luxury tax is the same as it has been in the past. The highest-spending teams pay a dollar in tax for every dollar their payroll is above the luxury tax line, which is $70 million this season and projected to be the same next season.

Reminder: The salary cap and luxury tax line are NOT the same thing. The salary cap is just above $58 million.

But beginning in the 2013-14 season, the luxury tax becomes much more punitive. The tax line is projected to move up by a few million, but the payments ratio of tax to salary will increase with every $5 million a team is over the line.

More Cuban: "In the past, I could fix any mistake just by spending money. And I did. Now, it wasn't just about spending more money, because it was a lot more money. What was $19 million in luxury tax last year would have been more than $65 million under the new rules in year three or later."

If teams are only trading or acquiring players whose contracts expire this season or next season, the punitive tax shouldn't play much of a role in their decision. But if any player in a deal has a contract that runs past 2013, the tax could certainly be a factor in the deal.

The full mid-level exception is not for everybody

Under the old CBA, teams over the cap (and even the tax line) could add a pretty good player each offseason, using their mid-level exception, which was equal to the league-average salary. This is how the Lakers were able to add Ron Artest (now Metta World Peace) in 2009, even though they were well over the cap.

But under the new CBA, only teams over the cap and below the tax line have the ability to use the full mid-level exception, allowing them to sign a player for four years, starting at $5 million per year (and can be split among multiple players). Teams over the tax line have a smaller mid-level exception, which can only be for three years, starting at $3 million per year.

Available mid-level exception, new CBA
Mid-level exception under new CBA
Payroll level Years Starting salary
Under the cap 2 $2.5 million
Over the cap, under the tax line 4 $5 million*
Over the tax line 3 $3 million
* This number will increase by 3 percent annually, starting with the 2013-14 season

Teams under the salary cap don't have a mid-level exception, but they do have a smaller "room" exception, which can be for two years, starting at $2.5 million.

Neither is the bi-annual exception

The bi-annual exception is a smaller exception that can be used once every two years by teams above the cap to add a player for more than the league minimum salary. But under the new CBA, tax-paying teams are no longer allowed to use it.

Now, these exceptions don't really come into play at the trade deadline. But the new rules really benefit the teams that are above the cap and below the tax line. So when teams make any kind of transaction, that's where they want to be as they project forward.

Even more from Cuban: "So now, if you look at the Heat as an example, because they're going to be over the luxury tax for the next three years, put aside the financial side of it, they can only use the mini mid-level and minimums to add a player. That's a big restriction."

Sign-and-trades aren't as much of an option

When the Cleveland Cavaliers and Toronto Raptors lost LeBron James and Chris Bosh to Miami in 2010, they were able to get something back (draft picks and trade exceptions) by working out sign-and-trade deals with the Heat. The sign-and-trade deals made sense for the Heat and the players, because under the old CBA, contracts signed with a player's current team could be six years long, with 10.5 percent raises. If James and Bosh had signed outright with the Heat, the contracts could only be five years long with eight percent raises.

Under the new CBA, new contracts with the player's current team can be five years long with 7.5 percent raises, while contracts with a new team can only be four years long with 4.5 percent raises. Another major change is that sign-and-trade deals are limited to the same maximums as deals with a new team (four years, 4.5 percent raises).

Max years and raises on new contracts
Structure of contracts
Type of contract Old CBA New CBA
Contract w/ same team 6 years, 10.5% raises 5 years, 7.5% raises
Contract w/ new team 5 years, 8% raises 4 years, 4.5% raises
Sign-and-trade contract 6 years, 10.5% raises 4 years, 4.5% raises

So if Dwight Howard wants to sign with a team with cap space (like Dallas or New Jersey) this summer, neither he nor his new team has any incentive to work out a sign-and-trade deal with Orlando. However, if he wanted to sign with a team that was over the cap (like the Lakers) or not under the cap enough to sign him, then that team would need to work out a sign-and-trade with the Magic.

(For example, to acquire Chandler in December, the Knicks worked out a three-way sign-and-trade with the Mavs and Wizards that shed them of the contracts of Andy Rautins and Ronny Turiaf, creating the needed cap space for Chandler's contract.)

The sign-and-trade rule change could affect the leverage in a potential Howard deal at the deadline. The Magic have additional leverage over Howard, knowing that if he wants to leave Orlando in the summer, he'll definitely have to sign a shorter deal with his new team. But the Nets also have additional leverage over the Magic, because Orlando's not getting anything back if they keep Howard past the deadline and he ultimately chooses to play in Brooklyn next season.

John Schuhmann is a staff writer for You can e-mail him here and follow him on twitter.

The views on this page do not necessarily reflect the views of the NBA, its clubs or Turner Broadcasting.

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