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Confirmed: Brooklyn Nets to pay nearly $80 million in luxury taxes

By Net Income
Mikhail Prokhorov

The numbers out Tuesday night confirm what's been expected for weeks: that the Nets spending spree will cost Mikhail Prokhorov heavily in luxury taxes. The numbers are the NBA's salary cap and luxury tax threshold for 2013-14 and what they mean is that the Nets could pay around $80 million in luxury taxes on top of $100.4 million in salary.

Howard Beck and Mike Mazzeo have slightly different numbers for the total taxes to be paid, but neither is putting the number below $72 million. A league source put the number at closer to $80 million. The number is so high because for the first time this season, the tax will be a progressive tax, with the penalty escalating as the salaries rise.

Instead of a dollar-for-dollar tax, Beck explains, "next season the penalty will start at $1.50 per dollar spent beyond the threshold, and it will keep increasing. Once a team has gone $5 million over the line, it will be taxed at $1.75 per dollar. At $10 million over, the rate increases to $2.50. At $15 million over, it shoots up to $3.25." If the NBA hadn't changed the formula, Prokhorov would have paid about $26 million, Beck estimates.

The highest previous luxury tax ever was the $52 million figure paid by the Trail Blazers, owned by Paul Allen, another of the world's richest men, in 2002-03. Portland won 50 games and lost in the first round. (Second highest amount was $45 million, paid by the Knicks in 2006-07 when they won 33 games.)

The Nets will pay third-highest luxury-tax bill for last season, paying out $12,883,647, according to ESPN.com’s Marc Stein. One saving grace of the Celtics' trade is that the Nets will be under the luxury tax threshold in 2015-16, with Gerald Wallace's salary now off the books. By doing so the Nets will avoid the dreaded repeater tax. Teams pay the repeater rate if they were taxpayers in at least three of the four previous seasons.

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