The Lakers, if they acquire Dwight Howard, figure to pose a major obstacle for the Heat next season in Miami’s quest to repeat as NBA champion.
But long-term, another potential impediment looms — not a team, but a document.
The collective bargaining agreement ratified last December will create serious challenges, depending in part on owner Micky Arison’s willingness to pay a luxury tax bill that could top $20 million or more annually in a few years.
If the Heat wins the next championship or two, it would be surprising if the Big 3 is broken up in two years, considering Arison’s desire to win. But it’s not out of the question, considering the luxury tax becomes far more punitive beginning with the 2013-14 season.
And keep in mind that LeBron James, Dwyane Wade and Chris Bosh can opt out of their six-year contracts after 2013-14 or 2014-15.
If the Big 3 stays intact, the luxury tax could seriously impact how the Heat constructs its supporting cast. And rules involving midlevel exceptions also will limit how the Heat can fortify its roster as long as it retains three contracts at or near the maximum salary.
The Heat was one of six teams required to pay a luxury tax for this past season, with Miami owing $6.1 million, or $1 for each $1 spent over the $70.3 million threshold.
But beginning with the 2013-14 season, teams that are between $1 and $5 million over the tax threshold must pay $1.50 on every $1 above the threshold. Teams that are $5 million to $10 million above the threshold must pay $1.75 for every $1.
And teams that are taxpayers in four out of any five seasons (starting in 2011-12) must increase their payment by $1 for each dollar spent, which would be financially painful for any owner.
Heat president Pat Riley said Arison “loves winning championships, but there is also a limit, and we have to be very conscious of that. We haven’t had long discussions about the luxury tax. Micky has always had the opinion, you give him the right name and that right name can lead this team to the promised land, he has always said yes.
“With how punitive the luxury tax is, and not only that, but the bite he has to take from a revenue sharing standpoint, that has to be considered, but that’s going to be his decision.”
For 2013-14, when the luxury tax threshold is projected to be in the $73 million range, Miami would have $85.6 million in cap commitments if Ray Allen and Rashard Lewis don’t exercise opt-out clauses; if the team exercises a $4 million option on Mario Chalmers; and if the amnesty clause is not used. And that’s before the Heat even considers using its $3 million taxpayer’s midlevel exception.
Amnestying Mike Miller and eliminating his $6.2 million salary for 2013-14 would save the Heat as much as $10.8 million in taxes that year and slightly more the next, making it highly tempting.
Each team can amnesty only one player during the length of the new 10-year labor agreement but can only use it on a player signed before the deal was ratified last December.
Two summers from now (after the 2013-14 season), James, Wade and Bosh all have opt-out clauses, with James and Bosh set to earn $20.6 million and Wade $20 million for 2014-15 if they do not opt out.
How much more, if anything, could they make if they opt out? That’s undetermined and will remain so until the summer of 2014. Cal-Irvine computer scientist and ESPN contributor Larry Coon, considered the foremost expert on the NBA salary cap, explained it this way:
“Players can receive either the league-wide maximum [which for them would be approximately 35 percent of the cap] or their personal maximum [105 percent of their previous salary], which is greater. We won’t know the league-wide maximum for 2014-15 until July 2014, but right now, it’s $19,136,250.”
But that figure is expected to grow — and potentially surpass their “personal maximums” — because league revenues are projected to grow.
The Big 3 all sacrificed some salary in 2010 to leave the Heat with enough money to re-sign Udonis Haslem and add Miller. Whether they would be willing to do that again eventually is conjecture.
If all three opt out in two years, they would be eligible to sign five-year deals with 7.5 percent annual raises from the Heat, compared with four years and 4.5 percent pay hikes if they change teams.
Miller ($6.6 million), Haslem ($4.6 million) and Joel Anthony ($3.8 million) also have opt-out clauses in the summer of 2014 but seem unlikely to use them, and there’s a good chance Miller will have been amnestied by then anyway.
The Heat’s other challenge is the strong likelihood that regardless of whether it amnesties Miller, Miami will have only the $3 million taxpayer’s exception — not the $5 million exception — next summer and likely beyond in the Big 3 era, unless it dumps at least one player from among Haslem, Anthony and Chalmers.
That’s because non-taxpaying teams that use the $5 million exception have a hard cap that’s $4 million above the tax threshold ($74.3 million this season, likely in the $77 million range for 2013-14).
Arison has said he does not believe the Heat will end up making money for this past season despite winning a championship.
“Every year in [AmericanAirlines Arena] we’ve lost money aside from last year under the old collective bargaining agreement, because of LeBron,” Arison told CNBC. “This is a hobby and passion — it’s not a business.”