Photo: Mike Ehrmann/Getty Images
As we spelled out at length yesterday, the Knicks could face a luxury tax penalty of up to $68 million in 2014-15 if they resigned Jeremy Lin.But there’s actually multiple ways the team could avoid this penalty while also signing Lin.
The first is fairly simple: they trade Lin before the 2014-15 season.
Lin is only paid $5 million per year in the next two seasons. In the summer of 2014, he’ll have a $14.8 million expiring contract. And in the NBA, big expiring contracts are super valuable as trade chips.
The second is a bit more complicated, but it accomplishes the same goal of avoiding the luxury tax hit.
As CBS points out, in the new CBA there’s something called the “stretch provision” which allows teams to avoid a one-time salary cap hit after cutting a player. If the Knicks released Lin in the summer of 2014, they could “stretch” his $14.8 million over the following three seasons (~$5 million per year).
The obvious downside is that NY would have $5 million of dead money on their books for three years. But that’s nothing compared to the tens of millions they would have to pay for keeping Lin.
But the larger point is this, the idea that the Knicks aren’t going to sign Lin strictly because of the luxury tax is a lie. If they wanted to, there are two simple ways to avoid the tax.
The Knicks obviously know this. So if they let Lin walk, there’s some other reasoning going on besides the simple financial consequences.
They have until midnight tonight to make a decision.
Business Insider Emails & Alerts
Site highlights each day to your inbox.