The Celtics Paid Up to Win. Can They Afford It?

To win in the NBA, you generally have to spend more money than your competition. Thirteen of the past 17 NBA champions have dipped into their wallets to pay the luxury tax. This is despite the fact that, on average, less than one-quarter of the league’s 30 teams have paid the luxury tax in any given year.

The Boston Celtics are one game away from becoming the latest in a long line of big spenders to lift the Larry O’Brien Trophy. With a payroll of $184.2 million for the 2023-24 season, per Spotrac, Boston was well over the luxury tax threshold of $165.3 million. As a result, owner Wyc Grousbeck will foot an estimated $41.4 million bill based on how the luxury tax is computed. It is the fifth highest tax bill in the NBA and will be distributed among all non-tax paying franchises.

The Celtics are on the brink of a title, however, not simply by spending more than other teams, but due to shrewd front-office decisions. In 2022, Boston dealt Josh Richardson, Romeo Langford and a first-round pick for Derrick White. Early last offseason, the team traded popular veteran Celtic Marcus Smart and some additional pieces for Kristaps Porzingis. Then, the Celtics acquired Jrue Holiday from Milwaukee for Malcolm Brogdon, Robert Williams III and two picks.

All three moves were unequivocal wins for Boston. The collective package of players and picks exchanged for three nearly All-Star level talents started just 59 games combined for various teams around the league this season.

It also helps that Boston’s two longest-tenured stars, Jayson Tatum and Jaylen Brown, are still on rookie contract extensions in 2023-24. Without any maximum salaries clogging up their cap sheet, the Celtics had space to go out and acquire elite supporting players for their duo.

The championship-level roster wasn’t cheap, though. The question now is whether, and for how long, president of basketball operations Brad Stevens can keep this nucleus together.

The good news for Boston fans is that the franchise will basically be able to run it back in 2024-25 with the same roster plus a draft pick or two, since the entire starting five and top three bench players are under contract. The best free agents on the roster are Xavier Tillman Sr. and Luke Kornet.

The bad news, however, is that Jaylen Brown’s supermax extension kicks in, which will pay him $49.4 million next year, a significant raise from the $31.8 million he cost the Celtics this year. With more than $192 million already owed to players next year, Boston will be deep in luxury tax territory again.

The NBA has a soft salary cap, meaning that teams can go over it using a variety of techniques allowed by the league’s collective bargaining agreement (CBA), but if they exceed the luxury tax threshold, then they must pay a luxury tax. Franchises start by paying $1.50 to the league for every dollar they go over the threshold, and the rate incrementally increases the further they go over. Additionally, the league imposes a repeat offender penalty (an additional dollar-for-dollar tax over the payroll threshold) for those who paid a tax in three of the previous four seasons.

After the 2024-25 season, the Celtics will be repeat offenders, having paid the tax in 2023 and 2024. They are also projected to go over the second apron, an additional level introduced in the 2023 CBA that is $17.5 million over the luxury tax threshold.

As outlined in the CBA, second apron teams can’t send out cash in a trade, aggregate contracts in a trade, take back more incoming money than outgoing money in a trade or use trade exceptions from prior years. Additionally, teams finishing 2025 over the second apron will have their 2032 first-round picks frozen (i.e. untradable). All those roster-building restrictions are in addition to the monetary penalties.

Financially, the Celtics would have actually been in more dire straits had they not recently negotiated an extension with Holiday. The former NBA champion turned down a $37.3 million player option for 2024-25 in exchange for a more secure long-term deal in Boston that pays him $134 million over four years, starting with $30 million next year. That modest pay cut translates to roughly $35 million in luxury tax savings for the Celtics, and also gives them the option to get below the second apron via trades if they deem that to be a priority.

Things will really get dicey for Boston in 2025-26, however, when the supermax extension for which Tatum is eligible this summer would begin to pay out. If Tatum and the team agree to that deal, Boston will already be nearly at the luxury tax threshold with salaries committed to just four players: Tatum, Brown, Holiday and Porzingis.

The big question Stevens will have to answer is what to do with White, who is on track to be a free agent in summer 2025 but could earn a four-year, $123 million extension this July that would kick in the season after next. Pay him now and figure out the finances later, or stand pat and trade him during the 2024-25 season so that he doesn’t walk away for nothing in return?

If the Celtics do pay White his market value, even if they fill out the entire rest of their 2025-26 roster with minimum salaries, they would still be staring down a tax bill of nearly $200 million. If they also try to hold onto reserve sharpshooter Sam Hauser, the penalty would likely exceed $250 million.

The Golden State Warriors were able to extend their 2010s dynasty with a title in 2021-22, when the team paid $175.9 million in salary and nearly as much ($170.3 million) in luxury tax. Changes in the 2023 CBA attempted to make it more difficult for deep-pocketed owners to spend their way out of trouble and force dominant teams to make tough decisions before they turn into dynasties. It seems to already be working.

The NBA is in an era of rare parity, with six different franchises winning six consecutive titles for the first time in league history. With a 3-1 NBA Finals lead and their entire core returning next season, the Boston Celtics are in a good position to break the streak, but their success has already cost a fortune, and it’s only going to get more expensive from here.

Will they be willing to pay for it?