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Where Should L.A. Lakers Cut Costs with Potential $100M+ Tax Bill Next Season?

Eric Pincus@@EricPincusLA Lakers Lead WriterFebruary 9, 2021

Los Angeles Lakers guard Alex Caruso (4) controls the ball during the first quarter of an NBA basketball game against the New Orleans Pelicans Friday, Jan. 15, 2021, in Los Angeles. (AP Photo/Ashley Landis)
Ashley Landis/Associated Press

After winning last season's NBA championship, the Los Angeles Lakers have a realistic chance to repeat, but the potential three-peat price would significantly increase in 2021-22.

How much of an appetite will Lakers governor Jeanie Buss have for the luxury tax?

The Lakers could face a bill near or even past the $105.6 million total tax they spent over the entire 2007-2014 period that included Kobe Bryant, eventually Pau Gasol and two NBA titles. Will Buss match that amount if needed? Can she scale back while keeping LeBron James and Anthony Davis competitive and happy?

Those decisions have yet to be made. This is a new position for Buss, who took over as the team's governor in 2013 after the death of her father, Jerry Buss, but it wasn't until 2017 that she took control of the basketball-related decisions from her brother Jim.

The 2020-21 season will be the first under Buss' control that will garner a luxury-tax penalty (perhaps $5 million in an early estimate). The team's turnaround under her leadership has been staggering, thanks to the acquisitions of James and Davis.

But the coronavirus pandemic may curb the Lakers' spending. L.A. doesn't have fans in attendance this season, and it will likely be the lowest revenue year since the team moved to Staples Center in 1999. Not a great time for a franchise-record payroll.

How does Buss tell James and Davis the team just won't be as good because the Lakers can't afford to keep it together? It's a huge ask of her. 

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Buss idolizes her late father, who was extremely influential in shaping modern-day sports entertainment. But even Dr. Buss never paid anything close to the luxury tax the Lakers may face next season. In fact, he resisted it as much as he could, selling draft picks and making other moves, declining Robert Horry's option instead of keeping him for the Gary Payton/Karl Malone season, for example. 

But Jerry Buss was willing to pay to give Bryant and Gasol the chance to win at the highest level. Expect his daughter to do the same, within reason. 

In any case, the cost of doing business is about to jump significantly. The Lakers already rewarded Kentavious Caldwell-Pope, Kyle Kuzma, James and Davis with contracts this past year. Beyond the Dennis Schroder question, the Lakers will need to decide on Montrezl Harrell, Alex Caruso and Talen Horton-Tucker's futures.

             

Dennis Schroder's Extension

Marcio Jose Sanchez/Associated Press

The Lakers discussed a contract extension with Schroder in December, with talks expected to "pick up again as soon as mid-February," per Adrian Wojnarowski of ESPN.

L.A. is limited in what it can offer the point guard after it acquired Schroder in a trade from the Oklahoma City Thunder in November. As of February 16, a Schroder maximum extension could top out at $86 million over four additional years, up from the limit of $39.4 million over two.

Schroder is third on the team in scoring (13.9 points per game) and minutes (30.6), and second in assists (4.2) to James. He's also a pest defensively. 

The Lakers may not need to pay him $21.5 million per year, though. He's likely looking for a deal in the $15 million- to $20 million-per-season range.

"If Jeff Teague can get $20 million, anything is possible for Dennis," a former Western Conference executive said (Teague signed a three-year, $57 million deal in 2017 with the Minnesota Timberwolves). "He probably gets $12-$15 million [per year]."

       

Will Lakers Look Past Klutch Relationship Re: Harrell? 

Marcio Jose Sanchez/Associated Press

The answer to the Lakers' most vexing questions may be as simple as Harrell taking a bigger deal elsewhere that L.A. doesn't have the means to give.

Harrell's stay with the Lakers may be brief, not because of fit (as the team's fourth-leading scorer) or politics (he's repped by James' agent, Rich Paul of Klutch Sports), but because of a hard limit to what the Lakers can offer—$11.1 million—if Harrell opts out before next season (up from his $9.7 million option).

"Trez does so many things that Dwight Howard didn't," the Western Conference executive said. "He's a regular scoring threat, but you don't have to run plays for him. He takes charges really well, but he won't block shots or be a big enough presence for a guy like [Nikola] Jokic."

And that Harrell shares an agent with James and Davis?

Harrell may leave for a bigger payday, but if the money is close, the relationship with Paul, James and Davis could be the deciding factor.

"[K]hemistry is Klutch," the Western Conference executive said.

        

What Would the Market Give Caruso?

Jae C. Hong/Associated Press

Meanwhile, Caruso has grown beyond just a fan favorite. Coach Frank Vogel trusts him to finish games and even inserted the defensive-minded guard into the starting lineup to close out the Miami Heat in Game 6 of the 2019-20 NBA Finals.

Caruso is shooting 46.3 percent from three-point range this season, which could earn him a significant pay hike (over his $2.8 million) as a free agent. 

The Lakers have his full rights and the ability to pay him more than any other team. If he continues to shoot that well, would Caruso get an offer in the Robert Covington range ($12 million to $13 million per season)?

          

THT's Complicated Situation

Marcio Jose Sanchez/Associated Press

Add a fourth guard in 20-year-old guard Horton-Tucker, and the Lakers could have quite an expensive backcourt. Horton-Tucker has piqued the interest of many scouts around the league. Fortunately for the Lakers, other teams are limited in what they can offer. Since he's an "Arenas Rule" restricted free agent, the Lakers can pay up to about $10.3 million in the first year, while other franchises would be capped at about $9.5 million.

The rule is complex, allowing for a potential massive raise in the third and fourth years of a contract worth up to about $83 million. But that's a lot to ask for a player averaging just 7.2 points per game. If he continues to impress, Horton-Tucker will get a raise, perhaps in the $5 million to $8 million range per season.

                              

Best-Case Scenario Includes a $96M Tax Bill

With an incomplete roster featuring Marc Gasol, James, Davis, Caldwell-Pope and Kuzma under contract, a 2021 first-round pick and the final year of Luol Deng's stretched salary ($5 million), the Lakers will already be locked into about $112 million for 2021-22.

Perhaps the best case for the Lakers would be $43 million combined for Schroder, Harrell, Caruso and Horton-Tucker. By rounding out the rest of the roster with minimum players—perhaps bringing back veterans like Markieff Morris, Wesley Matthews, Jared Dudley and Quinn Cook—the team's payroll would hit $162 million, plus $65.4 million in luxury tax, for $227.4 million.

And that's assuming "reasonable" contracts for the Lakers' free agents. Push their combined salary up to $50 million; that extra $7 million in salary bumps the luxury tax up to a massive $96.4 million. If they are integral parts of a team that wins a title this season, their prices could climb even higher, and even if it's just by a small margin, the tax bill could easily push the Lakers closer to $100 million to $110 million in total payroll.

That's why one of Harrell, Kuzma (via trade), Caruso or Horton-Tucker could be a budget casualty. As a tax team, the Lakers will only have a smaller mid-level exception (roughly $5.9 million) to replace whomever they lose. After that, it's just minimum contracts.

If there's a saving grace, the NBA will give teams a tax discount until the salary cap normalizes, presumably once the pandemic is behind us. The Lakers won't know the damage for some time, but a $100 million tax bill may "only" cost in the neighborhood of $75 million.

That may be the saving grace that enables Buss to give her squad the chance to win three in a row, presuming the Lakers can muscle their way through the 2020-21 season with another title.

                                   

Email Eric Pincus at eric.pincus@gmail.com and follow him on Twitter, @EricPincus.

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