Los Angeles Lakers: Why Did The Lakers Amnesty Metta World Peace?

The Los Angeles Lakers have decided to part ways with Metta World Peace.

Metta would have been owed $7.7 million for the 2013-14 season and for Los Angeles, which even without Dwight Howard has a significant amount of money already tied up, the luxury tax implications seem to not be worth the price.

Eric Pincus reported in the LA Times that by amnestying Metta, the Lakers would save roughly $19 million.

Marc Stein of ESPN recently announced that early projections of next season’s salary cap[1] have it increasing from $58.044 million to $58.5 million, meaning the tax threshold would be around $71.6 million.[2]

Before getting into the specifics, it may help to have a better understanding of the current tax implications for teams, as they have changed with the most recent CBA. In 2012-13, teams over the tax level paid a $1 tax for each $1 it was over the $70.307 million threshold. However, starting this season, the penalties will be much harsher for teams over the limit.

Teams will now be taxed at an incremental rate, meaning that the higher they are over the tax level, the more punishing the tax will be.  For any team over the determined threshold by no more than $5 million, they will pay $1.50 tax for every $1 their payroll exceeds the tax level. If a team exceeds the tax level by $5 million to $10 million, they will be taxed $1.75 for every $1 over the limit.

By choosing to use their amnesty clause on Metta World Peace, the Lakers payroll will dip to around $77 million[3], in turn decreasing their luxury tax bill to $8.3 million. Although he will still be paid, Metta’s salary will no longer have tax implications for the Lakers.

If Los Angeles had chosen not to amnesty World Peace, they would have been looking at paying about $112 million after taxes. Now, that number will drop to a much more palatable $93 million.

Not only does taking Metta’s salary off the books save the Lakers a significant amount of money this season, but also given the new CBA’s inclusion of “repeater tax,” the Lakers will now potentially save tens of millions in future seasons.

The repeater tax included in the new CBA states that “tax rates for teams that are taxpayers in at least 4 out of any 5 seasons (starting in 2011-2012) increase by $1.00 at each increment.” This means that instead of a $1.50 tax per $1 for being over the luxury tax threshold, repeat offenders would pay $2.50.

Ken Berger of CBSSports reports that the 2012-13 Lakers were a tax-paying team and despite still currently being over the tax level, by amnestying Metta, the Lakers give themselves a much better chance of avoiding the repeater tax.

Although the Lakers will start off next summer well below the salary cap, with Steve Nash being the only player on their books at $9.7 million, given that they stand very little chance of contending this season it would wise for them to make every attempt to avoid the luxury tax.

This is especially true if their plan is to spend a considerable amount of money next summer on free agents like LeBron James or Carmelo Anthony while understanding that Kobe wants to continue playing and probably isn’t going to do so at a discounted rate.

In essence, it appears as if the amnesty of Metta has very little to do with basketball, and a lot to do with money.

One thing is for sure; the choice to waive Metta World Peace certainly wasn’t a popular one.

Apparently, Kobe does care about some players. Just not Dwight.

While the decision to amnesty Metta was primarily a financial one, what on-court implications might this have for the Lakers next season?

In 2012-13, MWP averaged 12.4 points, five rebounds, 1.5 assists and 1.6 steals while playing 33.7 minutes per game.

After being unable to convince (beg) Dwight Howard to stay in L.A., the Lakers roster of Bryant, Pau Gasol, Nash, Steve Blake, Jordan Hill, Jodie Meeks and Robert Sacre appears unlikely to contend in a stacked Western Conference, much less make the playoffs.

Thus, the absence of World Peace will probably have very little impact on the outcome for L.A. Fortunately for the Lakers, they still have their first-round pick for the 2014 draft and given the strength of next year’s draft class, it may serve the Lakers well to lose enough games to land a top-10 pick.

Just a few days ago, MWP was very upbeat about his (former) team.

Despite being waived just 24 hours later, if his tweets are any indication of his mindset, Metta seems to be taking the news as well as one could.

While many are sad to see him go, rest assured that Metta will remain strong and that his heart will go on.

[1] According to the recent CBA (http://www.nba.com/media/CBA101_9.12.pdf), “The Salary Cap for each future season…will be calculated by multiplying projected “Basketball Related Income”…by 44.74%, subtracting projected player benefits, and then dividing the result by 30.

[2] That tax level is set at 53.51% of Basketball Related Income

[3] According to Pincus, (http://www.latimes.com/sports/lakersnow/la-sp-ln-metta-world-peace-amnesty-19-million-20130706,0,1647227.story) this number assumes the Lakers choose to use their $3.2 million, taxpayer mid-level exception.