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Salary Caps, Luxury Taxes, and the Cleveland Cavaliers

Stashed in: Basketball, Tryin to make a Dollar Out of 15 Cents, P.E. Class

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If Thompson signs a five-year, $80 million deal, Smith comes back for $6 million, Dellavedova signs for $5 million and the Cavs do not take the Haywood cap savings for themselves but instead trade his deal for another $10.5M player, the team's payroll would swell to about $124 million. By virtue of being almost $40 million over the tax line, the Cavs would pay a tax over $131 million for a total expenditure of $255 million of Dan Gilbert's hard-earned dollars.

Therefore, it's unlikely the Cavs bring back all three players and acquire additional payroll for Haywood's contract. Under the aforementioned projection, if the Cavs re-signed Thompson, Smith and Dellavedova and just waived Haywood's nonguaranteed contract, they would save over $51 million in taxes and almost $62 million total due to the increasing nature of the tax, resulting in a total tax of $80 million and a total expenditure around $193 million.

The business of basketball is such a head scratcher.

Especially since they're vastly expanding the salary cap over the next few years. 

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