I try, most of the time, to not get too deep into conversations about the NBA’s luxury tax. Sure, it comes up, especially since the Clippers have paid it at a historic rate under Steve Ballmer, but while I appreciate having one of the most willing-to-spend owners in the league, I also am not inclined to celebrate a guy worth upwards of $50,000,000,000 deciding he wants to dump another $25,000,000 into his sandbox to add a player to the Clippers. Ballmer spends tens of millions of dollars in additional luxury tax to add a player with about the same impact as I just felt spending a few hundred on a new couch. It’s a nice couch, and I’m happy to have it, but the purchase was hardly lavish or exemplary. I feel the same way when the Clippers make a move that makes the roster a little more expensive and Ballmer picks up the bill. And certainly, I’m not going to excuse the Clippers (or any other NBA team) making cost-cutting moves because I sympathize with a billionaire owner’s frugal plight. The decision to skimp on the 15th roster spot last season and utilize Moses Brown on a two-way contract (which carries no luxury tax penalty) as the team’s second center instead of signing a player for the veteran’s minimum cost the team in the win column for no reason other than saving Ballmer money.
At times during this era, we’ve kept our eye more closely on the team’s total salary number because of the rules attached to the luxury tax apron, a threshold several million dollars above the luxury tax line that places additional roster construction restrictions on teams that spend past it. For example, in the 2020 off-season, the Clippers signed Serge Ibaka using the full mid-level exception–a tool only available to teams under the apron that, when used, triggered the apron as a hard cap. In the years since, however, LAC’s skyrocketing payroll has left the apron in the dust. This has left them with some teambuilding limitations, like using the smaller taxpayer mid-level, losing the bi-annual exception, and not being able to acquire players in sign-and-trade transactions. It’s also meant that there’s been really no reason for fans to care about the team’s books, since once you passed the apron, there were no additional basketball consequences to going as far over as you liked–it was just Ballmer writing a check at the end of the year. But as the NBA’s new collective bargaining agreement takes effect this weekend, it’s time to get back to paying attention to the team’s salary picture due to a new invention designed to curb the spending of owners like Ballmer and Warriors boss Joe Lacob: the “second” apron.
The first apron is set at $7M over the luxury tax line, and still carries the restrictions it always has, although some things have gotten tricker, like salary matching in trades. For teams over the first apron, salary matching this July and at the 2024 deadline is limited to 110% instead of the previous 125%, but starting next off-season (including the 2024 edition of this June draft/pre-free agency trade window) that limit decreases again to 100%. Additionally, the relative buying power of the non-taxpayer mid-level exception increased in the new CBA, while the buying power of the taxpayer mid-level exception decreased and the taxpayer MLE can now only be used on 2 year contracts instead of 3, while the full MLE can still run for up to 4 seasons.
But the real crackdown comes at the second apron, set $17.5M over the luxury tax line. At the first apron, teams lose the non-taxpayer mid-level exception and can only access the smaller taxpayer mid-level. At the second apron, they lose that tool too, meaning they can only add free agents via the minimum salary. Second apron teams can’t sign players on the buyout market if those players had above-MLE contracts before being released (meaning no Russell Westbrook for the Clippers last February). They can no longer send out cash in trades, which the Clippers have used liberally to acquire second round draft picks, including the selection they used on Brandon Boston. They also are subject to the same trade limitations (110% beginning July 1st, 100% next summer) and one critical additional one beginning next off-season: no aggregation in trades. This means that second apron teams, beginning in the 2024 off-season, can no longer trade two $10M players for one $20M player, or even two $10M players for one $12M player. They are, essentially, fucked. Recent trades that brought Eric Bledsoe, Norman Powell, and Eric Gordon to the Clippers would all be disallowed under this new rule. Second apron teams can’t even receive a player back when signing-and-trading one of their own players away.
Originally, I had thought that the Clippers choosing to waive Eric Gordon was inspired by this new no-aggregation second apron rule; after all, if the Clippers want to pursue names like James Harden or Damian Lillard in trades in July (Lillard can’t legally be traded until July 9th due to his extension), they were going to need to aggregate multiple contracts in the 10-20 million range to make the math work to bring back a highly-paid star. But since that rule doesn’t take effect until the 2024 off-season, waiving Gordon had no effect on those pursuits (other than to take a $21M expiring contract off the table in those matching talks). The Clippers will be bound by the 110%+$0 rule instead of the 125%+$100,000 rule starting on 7/1, but that’s not fatal–for example, Norman Powell and Robert Covington can legally work as salary matching for Harden on 6/30, but on 7/1, the Clippers would need to throw in Amir Coffey to make it work. Not convenient, but not fatal.
As an aside, Harden does have a 15% ($5,346,000) trade kicker–the way this works is that Philadelphia pays the bonus, but it gets added to his salary number that goes on the Clippers’ cap sheet, meaning they have to account for bringing it back and paying the luxury tax on his full salary amount and it factors into the calculation of which apron tier they fall into. However, players are allowed to waive part or all of their kickers, meaning that if Harden is motivated to be traded from Philly to LAC, this isn’t a constraint that would kill a deal. To bring back Harden’s full trade bonus amount (in July, with 110% matching), the Clippers would have to send Philadelphia $37,260,000. To take him back with the entire bonus waived (again, in July, with the more restrictive trade math rules), the Clippers would only have to send $32,400,000. The aforementioned Powell/Covington/Coffey package totals $33,358,975, meaning the Clippers could bring back $36,694,872 under the 110% rule, so Harden would be required to give up about $4.3M of his bonus in that hypothetical. The politics of trade kickers can be contentious–will the Sixers, who have to write the check, tell James to waive it if he wants them to accomodate his trade request? Will the Clippers, who have to fit his salary number into their team-building plan, ask him to waive it so they can build the team going forward?
But back to second apron talk: if the aggregation rule isn’t taking effect until next summer, then the Clippers clearly didn’t waive Gordon because they needed to be able to maneuver underneath the second apron this summer to pursue July trades for Harden and Lillard. So why did they? In this case, it seems to have simply been a cost-cutting measure, avoiding paying an extra hundred million in salary + tax on a backup guard with some concurrent motivation to remove one of Ty Lue’s favorite barriers to block Bones Hyland and Terance Mann from getting more playing time.
There’s one more second apron wrinkle that might be even more devastating than the aggregation restrictions: draft punishments. Clippers fans who lived through the Paul George trade will know that the NBA has a “seven year rule” for future draft picks to be traded. Under the new CBA, teams who are in the second apron have their 7-year future draft pick “frozen,” meaning it can no longer be traded. This doesn’t apply to the 2023-24 season, but starts in the 2024-25 season, so again, waiving Gordon’s expiring deal didn’t offer the Clippers protections here. Once a pick 7 years has been “frozen,” it can then be moved to the end of the first round if the team is over the second apron again in 2 of the next 4 years. Picks can be “unfrozen” if the team is under the second apron in 3 of the next 4 years.
Let’s say the Clippers are over the second apron in 2024-25. That would “freeze” their 2032 pick, meaning that asset could not be traded for the next four years. If LAC was over the second apron twice in the 2026, 27, 28, and 29 seasons, they would automatically pick 30th in 2032, regardless of where they finish in the standings that season. Spend too much on a Harden/George/Leonard core over the next few seasons, and you could end up picking 30th in 2032 despite being one of the worst teams in the NBA in the 2031-32 season. Additionally, for the years that you’re over, more picks get frozen, and the 4-year clock to either unfreeze them or have them dropped to 30th keeps ticking. A team that is perennially over the second apron will never be able to take back more salary than it sends out in a trade, never be able to aggregate salaries in a trade, never be able to trade a future first round pick, and always select 30th regardless of the prior year’s finish. If that sounds untenable, it is; this tier was designed to be a place that a team could maybe justify going for a season under special circumstances, but never afford to stay. The reality that the less willing to spend owners faced was one where no financial penalty was going to stop Lacob and Ballmer from trying to win, so they had to make a system where spending would ultimately hurt your ability to build a winning team.
In essence, the second apron has become close to a de facto hard cap, not for the 2023-24 NBA season where the aggregation and draft pick rules are not yet in effect, but starting in the 2024-25 NBA season. At that point, curbing spending below the second apron will be crucial for the long-term organizational health and roster flexibility of teams like the Clippers and Warriors. You could go over, and you could even stay over for a 2nd year. It would be hard to make changes to your roster and those distant future picks would be “frozen” from trade negotiations, but if you had a good team and a shot at a title (or a repeat) and didn’t need to make moves to stay in contention, you’d get those picks back eventually. But after being over the second apron two years in a row, you essentially have to stay back under for the next three, as refreshing your talent without aggregation or exceptions is impossible and destroying your future first round picks is devastating.
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