So what gives? After all the Warriors did pick up their option on Damian Jones who is spending most of his time in Santa Cruz.
The most obvious reason is the one that the Warriors gave: the tax ramifications.
Sources: Warriors ecstatic about Looney’s development, but tax ramifications forced their hands. Damian Jones to have 3rd-year picked up.— Chris Haynes (@ChrisBHaynes) October 31, 2017
Looney’s option next year comes in at around $2.2 million. This is about $700 thousand more than the portion of the veteran minimum that counts against the cap. Compared to Damian Jones’ $1.5 million there’s no extra saving there.
As outlined previously in this piece on the state of the Warriors salary cap going forwards, in order to not disadvantage older players entitled to higher minimums, the NBA pays for anything over the second year figure of $1.47 million. That’s also the amount that counts towards the tax.
Still, $700 thousand isn’t very much. But by my calculations the Warriors could be up to as much as $30 million over the luxury tax line next year. At that point every dollar gets taxed at $4.75. So that $700 thousand difference is in fact worth around $3.325 million.
Crucially, the Warriors can still offer Looney a contract up to the value of his option if they want to at the end of the year. So unless he gets a bigger offer than the minimum, they can still bring him back.
It’s worth remembering that Ian Clark could not get more than the minimum despite being a much bigger part of the team, and James Michael McAdoo had to settle for a two-way contract with the Philadelphia 76ers.
It seems likely they would use the roster spot if they didn’t bring back Looney. However, they could free up even more money by either holding it open and signing a veteran later in the season for a pro-rated portion of the veteran minimum, or using it for a younger player with a lower minimum.
A related point is that this opens up the Warriors to be more flexible this year as well with the roster spot that Looney currently holds.
If a particularly interesting veteran comes onto the market later in the year they can now create a space to bring them in by dropping Looney, without leaving dead money on the cap next year.
The biggest question facing the Warriors is what Looney’s fit would be going forward. Now that he’s healthy, Looney has clearly showed a lot more in the last few weeks than he had done in his first couple of years.
With the three-headed monster of Zaza Pachulia, Javale McGee, and David West at center there’s not a lot of space to develop right now. But there’s still an opportunity for him to carve out a role and be a valuable player going forwards.
For the Warriors, they may well have saved themselves some money next year, and created some flexibility going forwards.
Balancing that against the risk of Looney being offered a bigger contract in the summer, it seems like a reasonable decision.