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Lin, New York and the NEW Luxury Tax

The original contract Houston offered to Lin versus the one he signed has serious implications for the Knicks. While I don't understand it all, I don't agree with the sign it now and worry about it later or the you overpaid in the past (and we didn't like it) so do it again now (because we like it), approaches. I think many of us don't really understand how much money is being discussed here and I stand at the front of that line.

David Aldrich gave us an idea in his "Lin's Future with Knicks Cloudy..." article on NBA.com:


The Rockets signed Lin to a three-year, $25.1 million offer sheet Friday, reworking the terms of the key third year of the contract from earlier proposals they had made in the week. In the offer sheet Lin signed, after getting $5 million in the first year of the contract and $5.225 million in the second, he’ll be paid $14.898 million in the third. Houston could do that because for cap purposes, the value of his deal is averaged for the team that signs a restricted free agent to an offer sheet and offers him a raise larger than the normal average in the third year. That means Lin would count for a little more than $8 million each year on Houston’s cap, even though he’d be paid less than that in each of the first two seasons and more than that in the third year.

But that won’t be the case for the Knicks. New York will have to absorb that entire $14.898 million in year three, which is the same year the Knicks are already on the tab for $24.3 million for Carmelo Anthony, $23.4 million for Amar’e Stoudemire and $14.5 million for Tyson Chandler. Those four salaries alone would put New York above the salary tax threshold of $70 million this season. By then, the more punitive penalties of the new collective bargaining agreement for taxpaying teams would kick in, with teams paying $1.50 in tax for every dollar they exceed the threshold up to $5 million.

They would pay $1.75 in tax for every dollar they exceeded the threshold by $5 million to $10 million, $2.50 per dollar from $10 million to $15 million above the threshold and $3.25 per dollar they exceeded the threshold from $15 million to $20 million. And if a team is a "repeater," having exceeded the threshold three straight seasons, those rates would increase by a dollar per $5 million above the threshold–to $2.50, $2.75, $3.50 and $4.25 per dollar over.

Those amounts of tax could quickly become prohibitive, even for a team like New York, perhaps the biggest revenue producing team in the league. It would be a key test of the new CBA, which was designed to discourage the league’s highest-spending teams from hoarding good players.

Clearly, we're not talking chump change to stop or slow down those who easily paid the luxury tax in the past. Anyone willing to break this down further into how many millions it could cost the Knicks in years 3, 4, 5 and beyond?

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