Knicks vs the New CBA

The New York Knicks, as currently constructed, are not a championship contender. They should expect to compete for home-court advantage and the goal should be reaching the Eastern Conference Finals, but the gap in star power between them and the Milwaukee Bucks and the Boston Celtics are too big to overcome.

The new CBA, constructed in a way that hurts the NBPA more than you’d think, has massive restrictions for teams that spend too much like the Golden State Warriors. For teams that exceed the first luxury tax apron, there aren’t harsh penalties, namely a reduction in Mid-Level Exception, being unable to sign buyout players, and a reduction in money you can take back in a trade from 125% to 110% of what you send. That apron sits $7 million over the luxury tax line. At $17.5 million, things get rough. The second apron’s penalties include the elimination of the MLE—meaning that the only way to add talent in free agency is through a veteran minimum contract—and cannot trade their first-round pick seven years in advance. Starting next season, the financial restrictions on both get tougher (can’t add any extra money through trade at all), and in the second apron, the elimination of sending players through sign-and-trades, and no cash in trades. If a team exceeds the second apron thrice in five seasons, their first-round pick immediately drops to the bottom, a more harsh form of baseball’s current CBT penalties.

So, why did I tell you all this? Well, the New York Knicks are going to have to dabble in luxury tax at some point in the near future if they seriously want to contend for a championship. It isn’t ideal for the owner’s pockets, but that’s the price of winning. The question we’re asking today is, can the Knicks field a contender while avoiding the second apron, and further, would it even be worth it to dive into the second apron at all?

Let’s start of with the current slate. Assuming they go into the season with Dylan Windler, Ryan Arcidiacono, and Da’Quan Jeffries as the last three roster spots, the Knicks will sit barely below the luxury tax with a payroll figure of $162.53M, giving them $2.8M of space. I want to get this out of the way early, the Knicks cannot legally exceed the first apron during the 2023-24 season ($172.35M). Why? They are hard-capped because of their use of the Mid-Level Exception to sign Donte DiVincenzo. If a team uses more than the taxpayer MLE ($5M), they are hard-capped at the first apron. Now, the Knicks could definitely stumble into the luxury tax this year, thanks, accidentally, to Leon Rose’s way of building contracts.

James Dolan may not be too enamored with his President of Basketball Operations if the unlikely incentives in several contracts go through. Thanks to Julius Randle’s resurgent 2022-23 season, his cap figure has increased for the rest of his contract because they moved to likely incentives. So did Isaiah Hartenstein’s after he fulfilled his $1M unlikely incentive. Let’s see the unlikely’s:

RJ Barrett: $2.9M (All-Star, All-NBA, All-Defense)

Evan Fournier: $1.5M (65+ Games + 75% of playoff games + Second Round, All-Star)

Donte DiVincenzo: $750,000 (A Bunch of Ridiculous Stuff)

So, only one guy matters here if no moves are made. Evan Fournier may not play 10 games, let alone 65. Donte DiVincenzo is not winning MVP or any of the crazy stuff that Fred Katz revealed about his deal. That brings us to RJ Barrett. Truth be told, I think we’d all be fine, Dolan included if RJ took a leap that got him to fulfill his unlikely incentives. That would bring this team so much closer to championship contention.

So, it seems unlikely they’ll dip into the luxury tax from that. They do have some space ($7M in particular) to add salary towards the end of the season, whether it’s through a trade or something else. The aprons will not apply, however, and I doubt that Dolan greenlights a trade that puts the Knicks in the luxury tax without it increasing their title odds by a fair amount.

So, back to the task at hand. Is it possible for the Knicks to stay below the second apron when/if they make their all-in push? Let’s use, say, Joel Embiid for this exercise:

The Knicks would have to take on money for this likely. The Sixers are currently a first-apron team and if they’re looking to trade Embiid, I’m guessing they do not want to be a luxury tax team anymore. However, the Knicks would not be able to take back too much, meaning Philly can’t go fully under in this hypothetical deal. If this were a 2024 move, the math gets harder since the Knicks wouldn’t have Evan Fournier’s deal to use as trade filler. Let’s say that the Knicks cobbled together a package (will not say who) that has them keep both Jalen Brunson and Julius Randle, but trading RJ Barrett. Between the three of them, their 2024-25 cap hit is $106 million by itself. That isn’t acknowledging what a likely Brunson extension would turn his cap into beyond 2025. Past that, the Knicks made a $20M a year commitment to Josh Hart and a more modest one to DiVincenzo. This also doesn’t add in the very real possibility that either RJ Barrett (we traded him for this exercise), Immanuel Quickley (due an extension), or Quentin Grimes (due an extension next offseason) still be here. In such a trade, however, they would have Mitchell Robinson’s $15M off the books as he likely would go to Philadelphia.

So, what’s the verdict? The second apron in 2025-26 is estimated to be $199M. The Knicks would have nearly $100M in Embiid, DiVincenzo, and Hart. Who knows how much Brunson gets (probably over $35M)? Do they extend Randle? Does he opt into his $32M player option? The Knicks would undoubtedly be in the luxury tax, and depending on who they keep through the Embiid acquisition, would have a very hard time staying under the second apron.

So, is it worth it in the first place to go over the second apron? Well, it depends on the roster you have. You would need a sustainable roster with a way to add young talent through the draft, as you cannot add salary with an MLE or through trades, so you’d need some flexibility. Unfortunately, it is very hard to maintain flexibility with a payroll so massive, as it implies many high contracts. A win-now team like the Clippers knows that their big spending will cause them to plummet into dark times when Kawhi Leonard and Paul George regress and/or leave in the coming years. A team has to be really confident in their core to put themselves in such a bind. Would the Knicks be very confident in a core of Jalen Brunson, Julius Randle, and Joel Embiid? Considering Embiid’s injury history and age? Part of me thinks that because of the restrictive second apron, the Knicks would have to do something alongside an Embiid trade, because you’re dooming the future of the roster with a Joel Embiid on the wrong side of 30. Could also say the same for an injury-prone Paul George, and offensive dynamos but defensive liabilities in Donovan Mitchell and Luka Doncic. Despite the pitfalls of all the potential moves, the Knicks will have to make one eventually, they backed themselves into that corner.