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Klay Thompson’s reported extension could spell doom for the league

If you’re a Warrior hater, look away now.

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Opposing franchises and fans have been dreaming for some time of the coming luxury tax crunch breaking up this legendary Golden State Warriors team prematurely.

But in a potentially devastating turn of events for the haters, these hopes and dreams could go up in smoke like a single quarter scoring record.

Earlier today Brady Klopfer picked up the report from Marcus Thompson of the Athletic that Klay Thompson (no relation) is in discussions about an extension.

How much might Thompson leave on the table?!

This is potentially huge news for a number of reasons. The maximum extension Thompson can sign is a contract starting at a 120% increase of his 2018-19 salary. This would start out at $22.8 million and average $25.5 million over four years.

Contrast that to what he’d be eligible for if he waited until free agency - a starting salary of $32.4 million and an average of $37.6 million over five years.

It’s been widely trailed, and expected, that Thompson would likely need to take a discount from the maximum he could get to help the Warriors keep down the bills. This is something he’s previously said he would be open to. What’s interesting though, is that this would be an even bigger discount than the one Kevin Durant gave back last summer.

Amazingly, Marcus Thompson’s report had an even bigger discount being discussed - a $92 million contract with an annual cost of around $23 million over four years. This would come with a starting salary in 2019-20 of around $20.75 million.

Can you repeat that please?

Yep, that’s right. In the 2019-20 season Klay Thompson would be looking at a starting salary of somewhere between $20.75 million and $23 million.

This really, really matters because the 2019-20 season is the same season in which the Warriors will become eligible for the dreaded repeater tax. The repeater tax basically works by vastly increasing the tax teams have to pay once they’ve been in the luxury tax for a certain number of years.

As salary cap legend Danny Leroux explained earlier this year:

A team must be taxed that season and have paid the luxury tax in at least three of the previous four years. Put a different way, the season in question must be at least the fourth time in the last five years (including that season) that the franchise has paid the luxury tax.

In Golden State’s case, that stringent standard helps slow down their escalating costs. Because they needed to clear salary cap space to sign Kevin Durant, the Warriors have been a taxpayer in only one of the last three seasons: 2015-16.

As I set out in this piece on Durant’s willingness to take discounts a coupe of months ago, if the Warriors can avoid being in the luxury tax in 2019-20, then the earliest they will be eligible for the repeater tax will be the 2021-22 season, the final year of Steph Curry’s mega-deal.

All of a sudden those dreaded monster tax bills become a lot more manageable.

I ain’t sacrificing $%&?

There would still need to be a whole lot more moves for the Warriors to make if they were to duck under the luxury tax line in 2019-20. Most notably it would mean trading Andre Iguodala in the final year of his contract, and Durant being open to sign for less than his maximum either this summer or next.

Alternatively the Warriors could face down the repeater tax but take a much smaller overall tax hit and then retain Iguodala. Given how he’s looked in this playoffs, that may well be worth doing when push comes to shove and the money from the new arena is rolling in.

And of course this all sets the tone for any extension talks involving Draymond Green the following summer.

It’s important to remember that this is just a report at this stage, and nothing will be signed and sealed until the summer at the earliest.

But this report opens up a very faint possibility to become slightly more realistic, and demonstrates once again that the special atmosphere and team-first culture that the Warriors have created here is worth more than it’s weight in gold.

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