Jerry Reinsdorf and the Luxury Tax: How Far Will He Go?


The Bulls lost out on another potential free agent target in O.J. Mayo. The ex-Grizzlies guard signed a multi-year deal with the Dallas Mavericks, one of the teams that had reported interest in him earlier this week.

WIth Mayo in Dallas, the market for the Bulls continues to shrink — and they don’t seem to care.

Jerry Reinsdorf is obsessive compulsive about staying under the luxury tax and is about another week away from envisioning a flying aircraft carrier he’ll call the “Sproose Goose”.

Gar Forman and John Paxson have their hands tied and even if they actually do want to make basketball decisions like they’ve said in the recent past, they can’t. The man wearing tissue boxes for shoes has them hogtied around his finger and at his beck and call.

Chicago needs to fill out three more roster spots to meet the minimum of 12. Right now they have plans on matching Omer Asik which would give them 10 players under contract but they would be at roughly $68 million when the luxury tax is around $70 million.

So it is possible for Howard Hughes Jerry Reinsdorf to make his impossible dream come true but it’s going to take a wingman and a prayer to get him there.

But that depends on what the dream is. If the dream is to stay under the luxury tax completely then that’s not going to happen unless the Bulls dump one of their core contracts (everyone in the room turns their attention to Carlos Boozer twiddling his thumbs and trying to not make eye contact).

If the dream is to stay under the apron, which is $4 million into the tax, then that’s very much achievable.

The new tax doesn’t kick in until after this upcoming season so if the Bulls when over the tax but traded to get back under it before the season was over, they don’t have to pay the tax. Under the new tax, the fees are increased from a dollar on every dollar over the tax a team is (so if you’re $500,000 over that’s what you pay in taxes) to .25 cent increments on every $5 million over you go ($1.50, $1.75, $2.00, ect.)

Jerry Reinsdorf fears this new tax the way Chewbacca hated baths. So to understand why he wants to avoid the tax and why he’s being so cheap in free agency, that’s the reason.

Also, any non-tax paying team gets to divvy up 50% of the tax paid. So there’s that incentive for Reinsdorf to stay under the tax.

The Omer Asik Conundrum: The Bulls plans to match Omer Asik’s offer sheet from Houston seems to violently contradict Reinsdorf’s outlines. The Rockets are set to offer Asik $25 million over three seasons and once the Bulls receive the offer sheet they have three days to match it or Asik is officially a Rocket.

Note that the clock starts when the Bulls get the sheet, not when Asik signs it. However Chicago is expected receive the offer sheet today in Las Vegas. That means we will know by Saturday were Asik will be paling ball this year.

The Bulls have said all along that they’d love nothing more than to bring Asik back. The problem isn’t the first two years of his contract, it’s the $15 million third year. But should the Bulls match they can trade Asik at the deadline during the third year of the deal and escape having his contract on the books and counting against the tax.

The problem to Jerry Reinsdorf is that the contract this year would no doubt push the Bulls over over the Luxury Tax to approximately $72 million. If he were to sign two rookie free agents at the rookie minimum, Reinsdorf would arrive just under the $4 million tax apron.

But what this means is that the Bulls would get their full $5 million Mid-Level Exception. Reinsdorf would still have to pay the tax which would cost him he exact amount he is over the tax.

But more importantly — at least maybe in the future– the Bulls would be under the $5 million tax ceiling meaning they’d still be operating under the previous tax rules (a dollar on every dollar). If Reinsdorf matches Asik but then signs veterans at the minimum (like Michael Redd), then he’d most certainly go over the $5 million threshold.

Reinsdorf is skittish about going over the actual tax, going over the $5 million threshold might kill him.

No matter how the Bulls slice it, they’re going to go over the tax. The question has always been how far over will the Bulls actually be willing to go.