LeBron James, the Golden State Warriors’ tax bill and what else to watch in 2023 NBA free agency.
The NBA offseason never stops.
More than 160 players have already signed new contracts, and the vast majority of roster spots are filled heading into training camp in September. But there are still plenty of storylines to keep an eye on — and we’re not just talking about the futures of Kevin Durant and Donovan Mitchell, both of whom will have an impact not only on this season but on the summer of 2023.
If that free agency period began right now, the class would be considered historic. Six of the top available players either have won a regular-season MVP or were a key part of a team that won an NBA championship.
However, with 11 months to go before 2023 free agency officially opens, expect that class to shrink between now and then.
It starts in Los Angeles, where LeBron James is faced with a decision on whether to extend his contract or become the most sought-out free agent in 2023.
James, at least for now, is the headliner of a 2023 offseason for which nearly half the league’s teams are projected to have cap space.
The top free agent in the 2023 class could be off the market on Aug. 4.
That’s the day James becomes eligible to sign a two-year, $97.1 million extension with the Los Angeles Lakers. The two-year term is the maximum allowed under the CBA because of the over-38 rule.
By agreeing to a new contract, James would bump his career earnings to $532 million, the most ever for an NBA player (a record that is sure to fall in the coming years as player salaries continue to grow).
Even if James signs an extension, the Lakers project to have nearly $23 million in cap space next summer (and if he doesn’t sign an extension, that number is about the same because of his cap hold, which would be on the Lakers’ books until he re-signs or signs elsewhere). That number could increase if Talen Horton-Tucker declines his $11 million player option or he is traded before then.
While that cap space is significant, it’s not enough to add a max-level free agent, which is part of the reason the Lakers should feel a sense of urgency to swap Russell Westbrook for Brooklyn Nets guard Kyrie Irving or multiple players under contract for next season even if that means a future first-round pick is lost.
The Lakers would acquire Irving’s Bird rights in a trade, allowing them to exceed the cap to sign the free agent guard next offseason.
If the Lakers can’t find a Westbrook deal to their liking, they could use their cap space next summer to add multiple players around James and Anthony Davis, similar to what they did in 2019, when they signed Danny Green, Kentavious Caldwell-Pope, Alex Caruso, Avery Bradley and JaVale McGee — which helped them win a championship that season.
The great unknown is what could happen if James does not extend and plays out the season on an expiring contract.
Until a James extension is signed in Los Angeles, the Cleveland Cavaliers should be a team to keep an eye on next offseason.
Cleveland doubled its win total from the 2020-21 season (22 to 42) and was one of the best success stories last year, despite losing in the play-in tournament.
Would James return for a third tenure in Cleveland if he views the Lakers roster as not championship-worthy?
The championship window in Golden State
For a second consecutive season, the payroll in Golden State is expected to exceed $350 million in salary and tax penalties.
Poole is set to be a restricted free agent next summer while Wiggins will be unrestricted.
Green has two years left on his existing deal, which pays $25.8 million this year with the $27.6 million option in 2023-24. He can sign an extension this summer, but the rules of the CBA prevent him from signing a deal that would pay him less than what the option year currently pays in the first year of an extension.
That means if the Warriors and Green entertain talks on a new contract this year, the first-year salary in 2023-24 has to be at a minimum $27.6 million if the player option is removed. There are no restrictions relating to declining salary beyond the first year of an extension.
Klay Thompson is extension eligible up until Oct. 17, and Golden State can add three more additional years on top of the two seasons left on his contract.
Counting Green’s option, the Warriors are right at the $161 million tax threshold for 2023-24. If Wiggins extends for a starting salary of $25 million and Poole signs at $20 million, the Warriors would owe $201 million toward the luxury tax. That, combined with more than $200 million in salary, would make Golden State the first $400 million team in league history.
“What I’m saying is to assume that we would go 4-500 million dollars at this time, it’s not possible,” owner Joe Lacob told Tim Kawakami of The Athletic. “We’re not far from it. I’m just saying you can’t expect those kinds of numbers, unless we were to raise everyone’s ticket prices immensely, and I don’t think anyone wants that.”
Lacob was recently fined $500K after he made it clear on the Point Forward Podcast hosted by Andre Iguodala and Evan Turner that he is unhappy that the Warriors are being penalized for building a roster through the draft.
“The truth is, we’re only $40 million more than the luxury tax. Now, that’s not small, but it’s not a massive number. We’re $200 million over in total because most of that is this incredible penal luxury tax. And what I consider to be unfair and I’m going to say it on this podcast and I hope it gets back to whoever is listening. Obviously, it’s self-serving for me to say this, but I think it’s a very unfair system because our team is built by … all top eight players are all drafted by this team.”
The Warriors do have a strong record in the draft, but it should be mentioned that part of the reason their tax penalty is so high is because of the Kevin Durant signing in 2016 and the trades following his departure that brought them Wiggins in 2020. If neither transaction happens, the likelihood is that the Warriors are not in the luxury tax four out five seasons and are not a repeater tax team.
Kyrie Irving and James Harden
The former Brooklyn teammates (albeit briefly) are looking to reestablish themselves as players worthy of a max contract in 2023.
After finding limited free agent and trade options in late June, Irving opted into his $36.5 million deal for this season and will become an unrestricted free agent in 2023 — assuming he doesn’t sign an extension with the Nets or a team he is traded to.
One date to keep an eye on for Irving — and any pending free agent — involved in trade talks is Jan. 30. If Irving is traded after that date, the maximum extension a new team can offer is two additional years at a 5% raise, significantly less than what a max contract would be in free agency.
Harden took one of the bigger pay cuts in league history when he declined his $47.4 million player option only to sign a new contract that starts at $33 million.
“I had conversations with [76ers president] Daryl [Morey] and it was explained how we could get better and what the market value was for certain players,” Harden told Yahoo Sports. “I told Daryl to improve the roster, sign who we needed to sign and give me whatever is left over.”
But what happens if Harden continues to struggle on the court? Would the 76ers still reward him for sacrificing money this season?
As Adrian Wojnarowski reported, the NBA has opened up an investigation for possible tampering and salary cap circumvention as it relates to the structure of the new Harden contract, looking into whether there is a handshake agreement on a contract for next offseason.
Harden has a player option in 2023-24 and can recoup most of the lost earnings in 2023 with a contract that starts at $46.7 million.
Philadelphia could be in position to add other free agents next summer if they find a home for the last year of Tobias Harris‘ contract in a trade without taking back significant salary.
However, in order to do so, the 76ers would either need Harden to opt into his $35.6 million contract or decline his option but sign a new long-term contract at a comparable annual salary.
Will a new CBA impact free agency?
The NBA and the players’ association have until Dec. 15 to mutually opt out of the current collective bargaining agreement. However, if either side does so, that does not necessarily mean we are heading toward a work stoppage next July.
The two sides have had 11 years of labor peace, and after withstanding two years of financial hardship due to the COVID-19 pandemic, the league brought in a record $8.99 billion in basketball-related income in 2021-22.
“The numbers did surprise me to a certain degree because it exceeded projections, and the projections represent where we think our business is going,” commissioner Adam Silver said during summer league. “I think it’s quite remarkable from where we came 2½ years ago.”
Of course there will be minor tweaks to the current CBA — the age limit, revenue sharing and adjustments to the luxury tax — but do not expect a major overhaul.
How many teams are projected to have cap space?
The business of the NBA is healthy, and as a result, the salary cap for a second consecutive season is projected to increase 10% to $133 million in 2023-24.
The rise in the cap is a $24 million increase from the 2020-21 season, the first full year the league was impacted severely by financial losses because of COVID-19.
Because of the significant increase, ESPN projects 13 teams to have cap space next offseason.
In comparison, a combined nine teams had spending power over the past two offseasons.
- The Charlotte Hornets were once thought of as a team that could enter the luxury tax because of the hefty price to re-sign free agent Miles Bridges. That all changed when the forward was charged with three counts of felony domestic violence. With his future in the NBA uncertain, the Hornets could enter next offseason with a projected $27 million in room (including the free agent hold of P.J. Washington). However to have room, the Hornets would need to renounce the $16.2 million cap hold of Bridges.
- The Cavaliers’ future cap space will be determined by the futures of restricted free agent Collin Sexton (who remains unsigned this summer) and Caris LeVert, who is extension eligible this year. If neither player is on the roster next season, Cleveland could have up to $28 million in room.
- The Detroit Pistons, Houston Rockets, San Antonio Spurs and Orlando Magic have built their rosters through the draft with a combined 24 players on first-round scale contracts for next season. The low salaries could see each team have a minimum of $60 million in cap space in 2023.
- The Indiana Pacers saw the offer sheet on restricted free agent Deandre Ayton matched and currently have $30 million in room. That number is expected to double next offseason if Myles Turner does not sign an extension and becomes an unrestricted free agent.
- The Lakers go from a luxury tax team after three consecutive seasons to a team below the cap. How much cap space Los Angeles has will be based on the future of LeBron James.
- The Memphis Grizzlies once again are positioned to have cap space. However, as the past two years have proven, the Grizzlies are more inclined to retain their own free agents (Tyus Jones) rather than add via free agency. Memphis could have close to $27 million if it does not retain Dillon Brooks and Steven Adams.
- The Minnesota Timberwolves have $90 million committed to Karl-Anthony Towns, Rudy Gobert and Anthony Edwards but could still have $37 million in room available. Because the first year of an Edwards extension would not start until 2024, next offseason represents the last opportunity for the Timberwolves to have cap flexibility with this core.
- The Oklahoma City Thunder have six players on first-round scale contracts and could have $34 million in room with the dead money for Kemba Walker and JaMychal Green coming off the books (along with the expiring contract of Derrick Favors).
- The Sacramento Kings have more than $30 million in expiring contracts this season and could have $24 million in room next July.
- Cap flexibility in Utah is fluid because of the uncertainty of Donovan Mitchell. With Mitchell on the roster, the Jazz could have up to $36 million in cap space. That number will only increase if the All-Star is traded and Utah doesn’t bring back significant long-term salary in return.
Should we expect more extensions before the season starts in October and into the regular season?
The trend we saw last season of players securing guaranteed money before hitting free agency should continue this offseason and into the regular season.
Beyond the 11 rookies who signed extensions off their first-round scale deals, an additional 21 veterans agreed to long-term contracts to bypass free agency.
We are only a third of the way to reaching that number this offseason (four rookies and eight veterans) but the slow pace is partially a function of restrictions on when a player can sign a new deal, particularly for those who were recently traded.
CJ McCollum, Jerami Grant and Christian Wood are in a holding pattern because they are limited by trade restrictions. For a period of six months from when the trade was completed, a player can only add three years to their contract (including what is left on the original one) and are limited to a 5% increase.
Starting on Aug. 8, McCollum can add on three additional seasons for $139.2 million in new money.
Starting on Christmas Day, Wood can agree to a four-year, $77 million extension with the Mavericks. Two weeks later (Jan. 7), Grant can ink a four-year, $133 million extension with Portland.
What theme should we keep an eye on?
Keep an eye on the group of players who are eligible for rookie extensions.
We have already seen Zion Williamson, Ja Morant and Darius Garland — the Nos. 1, 2 and 5 picks in the 2019 draft, respectively — agree to max extensions in the first week of July.
The three decisions were not surprising even with Williamson missing all of last season due to a foot injury (the contract is heavily protected if the former No. 1 pick suffers a catastrophic injury).
What did come as a surprise was No. 29 pick Keldon Johnson agreeing to a four-year, $74 million ($6 million in additional unlikely bonuses) with the Spurs before the month of July ended.
The Johnson extension should serve as a sign that teams are willing to take an aggressive approach now and not wait until the Oct. 17 extension deadline to come to terms on a deal — or wait until that player becomes a restricted free agent next July, when the cap is expected to rise.
By waiting until next offseason, teams risk paying a higher premium on their own player or perhaps having to match an offer sheet from one of the 13 teams with cap space.
There have been only two offer sheets since 2020 (Bogdan Bogdanovic and Deandre Ayton) and that number would likely increase when more teams have money to spend.
One stumbling block, however, could be extension candidates linked to a possible trade.
By extending shooting guard Tyler Herro before Oct. 15, the Heat would struggle to fit him into a trade because of the poison-pill restriction in the contract.
For example, if Herro signed a four-year, $110 million extension with Miami, his outgoing salary in a trade would be $5.7 million (his fourth-year salary) and the incoming salary for the new team would be $23.3 million (the average of the extension and the last year of the rookie scale contract).
Out of the 179 players with a poison pill restriction, only one (Devin Harris in 2008 to New Jersey) has been traded.
What about players who are rookie extension eligible in 2023?
The 2020 draft class could feature the fewest rookie max extensions in league history: two.
Besides Anthony Edwards and LaMelo Ball, there are no players drafted in the first round who have justified a five-year, $202.5 million contract with their play in their first two seasons.
If Edwards is indeed extended, Minnesota would be committed to $130 million between Edwards, Karl-Anthony Towns and Rudy Gobert in 2024-25.
Ball would become the first Charlotte player to receive a rookie max contract under the watch of owner Michael Jordan.
How many teams project to be in the luxury tax?
The Warriors are not the only team that will pay a significant tax penalty in 2023-24.
However, instead of paying a $135 million penalty, the Clippers will now owe $175 million because of the repeater penalty (four years straight or four out of five seasons).
The Clippers and Warriors could spend close to $800 million in salary and tax penalties for just one season.
Unlike the Warriors, who have decisions with their own free agents, the Clippers are locked in with their roster and return 13 players next season.
Despite the gap in pay disparity, the non-tax teams will continue to benefit from the high spending.
Teams that are below the tax in the next three seasons (including last year), stand to receive over $30 million in tax distribution from teams paying a penalty.
The number of teams in the tax next season is projected to decrease from 11 to seven (Golden State, LA Clippers, Boston, Dallas, Milwaukee, Philadelphia and Phoenix).
Are there any players who are supermax eligible?
Unlike Denver Nuggets center Nikola Jokic, who reached the supermax criteria by winning MVP in 2020-21 but had to wait a year to sign his $270 million contract in July, there are no players in that category entering the 2022-23 season.
The Celtics, Jayson Tatum earned All-NBA honors in 2021-22 and will become supermax eligible if he earns All-NBA once again in 2022-23. However, Tatum would have to wait until the 2024 offseason to sign a five-year, $298 million extension. He is ineligible next offseason because he is one year short of the years of service criteria.
Jaylen Brown, Pascal Siakam and Fred VanVleet could become supermax eligible by earning All-NBA honors in 2022-23 and will have reached the years of service criteria to ink the new deal next offseason.
Brown is in a unique situation. Starting on Oct. 1 and up until the last day prior to the start of the regular season, he is eligible to sign a three-year, $119.5 million extension. However, that is $123 million less than what he could earn on a five-year deal with the Celtics by waiting to become a free agent in 2024 — and $63 million less than what he’d get on a four-year deal with another team.
If Brown doesn’t sign an extension and is named All-NBA in 2023 or 2024, he would become eligible to sign a five-year, $283 million contract with the Celtics.
If he did sign an extension this offseason — or he was traded to another team before the end of the year — Brown would no longer be supermax eligible, even if he achieved All-NBA status this season.
Siakam was voted All-NBA in 2021-22, but because he is short of the years requirement (a player must have seven years of service, Siakam has six), he needs to earn All-NBA in 2023 to remain supermax eligible. He can currently sign a three-year, $135.7 million extension before the start of the regular season.
VanVleet is also eligible to sign a three-year, $88.7 million extension if the 2023-24 player option is exercised or a four-year, $114.2 million extension that would decline his player option.
Like Brown and Siakam, VanVleet would lose the supermax option if he takes the guaranteed money now instead of rolling the dice that another All-Star season could possibly be parlayed into an All-NBA nod. However, despite being a first-time All-Star in 2022, VanVleet earned only one All-NBA vote following the season.
As for the rookie extensions, Morant, Williamson and Garland can bump up their first-year salary from 25% of the cap to 30% by being voted All-NBA first team (or winning MVP or Defensive Player of the Year). Morant and Garland will also see a $38 million increase in total salary from the original $193 million extension if they are voted second-team or third-team All-NBA.
The 2023 free agent class
Franchise: LeBron James
All-Star: Kyrie Irving, Draymond Green (P), James Harden (P), Andrew Wiggins, Khris Middleton (P) and Fred VanVleet (P)
Top starter: De’Andre Hunter (R), Nikola Vucevic, Christian Wood, Myles Turner, Tyler Herro (R), D’Angelo Russell, RJ Barrett (R), Jerami Grant, Harrison Barnes, Bojan Bogdanovic, Kyle Kuzma (P), Kristaps Porzingis (P) and Jordan Poole (R)
Starter: Bogdan Bogdanovic (P), Al Horford, Seth Curry, P.J. Washington (R), Caris LeVert, Kevin Porter Jr. (R), Reggie Jackson, Russell Westbrook, Steven Adams, Dillon Brooks, Brandon Clarke (R), Brook Lopez, Matisse Thybulle (R), Jae Crowder, Cameron Johnson (R), Josh Hart (P), Nassir Little (R), Jakob Poeltl, Gary Trent Jr. (P) and Will Barton
Key reserve: Danilo Gallinari (P), Grant Williams (R), TJ Warren, Kelly Oubre Jr.. Mason Plumlee, Ayo Dosunmu (R), Andre Drummond (P), Derrick Jones Jr. (P), Coby White (R), Kevin Love, Maxi Kleber, Dwight Powell, Bruce Brown (P), Jeff Green, Alec Burks (T), Hamidou Diallo, Cory Joseph, Nerlens Noel (T), Donte DiVincenzo (P), Kenyon Martin Jr. (R), Oshae Brissett, John Wall (T), Talen Horton-Tucker (P), Stanley Johnson, Damian Jones (P), Kendrick Nunn, Lonnie Walker IV, Danny Green, Xavier Tillman (R), Victor Oladipo (P), Max Strus, Gabe Vincent, Omer Yurtseven, Joe Ingles, Wesley Matthews, Naz Reid, Jaxson Hayes (R) Cam Reddish (R), Derrick Rose (T), Darius Bazley (R), Derrick Favors, JaMychal Green, Terrence Ross, Shake Milton, Georges Niang, Josh Okogie, Dario Saric, Justise Winslow, Terence Davis, Alex Len, Tre Jones (R), Josh Richardson, Isaiah Roby, Otto Porter Jr. (P), Malik Beasley (T), Patrick Beverley, Jordan Clarkson (P), Rudy Gay (P), Nickeil Alexander-Walker (R) and Rui Hachimura (R)
(P) = Player option | (T) = Team option | (R) = Restricted
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