Is New Orleans Pelicans Stance on Luxury Tax Preventing Them From Competing?

The Pelicans have shown an unwillingness to pay the luxury tax. Will that hurt them in the long run?

Sep 26, 2022; New Orleans, LA, USA; New Orleans Pelicans vice president of basketball operations David Griffin during a press conference at the New Orleans Pelicans Media Day from the Smoothie King Center. / Stephen Lew-USA TODAY Sports

The New Orleans Pelicans are one of five NBA teams who have never reached an NBA Finals. Since their New Orleans revival as a basketball franchise in 2002, the Pelicans have not made it past the second round of the playoffs.

Further, since the 2017 NBA Collective Bargain Agreement went into effect, New Orleans has not paid luxury tax in any year. Is that holding them back?

According to Sportico, 13 of the last 17 NBA champions have paid luxury tax the year they won the championship.

This year's champion, the Boston Celtics, paid an estimated $41.4 million in luxury taxes. That number figures to climb even higher this year after giving extensions to Jayson Tatum, Jaylen Brown, and Jrue Holiday this summer.

Fitting, the Celtics figure to be in the thick of the championship hunt again, having made the playoffs the last 10 straight years.

The Pelicans seemingly avoid the tax payments at all costs. Last season, they traded guard Kira Lewis, Jr. before the trade deadline to avoid the penalty for exceeding the $165.3 million luxury tax threshold.

Lewis, Jr. was a former first-round pick in New Orleans, but injuries derailed the start of his career. The Pelicans also attached a second-round pick in the deal to trade him.

The NBA has an incentive for teams who do not go over the tax threshold.

If a team does not go over the tax once in the entirety of the CBA deal through the first year of a new one, those teams receive a $46.5 million kickback. Approximately 12 teams have received the full kickback amount for not going over the tax since 2017.

None of those teams have won a championship or even made the NBA Finals.

New Orleans is currently projected to pay $2.5 million in luxury taxes as it stands now. The Pelicans could make a move like last season to dip under the tax threshold and avoid penalty.

There are uncertainties on the roster currently, with no clear path at the center position and major questions surrounding the extensions of Brandon Ingram and Trey Murphy III.

Murphy III's extension is expected to be done before the start of the season. Both sides easily understand the value of this.

Ingram's extension has been the talk of the summer for the Pelicans. Ingram reportedly wants between $45-$50 million annually and New Orleans isn't willing to accept his demands. For now, Ingram remains on the roster, but he could be moved during the season to collect some compensation before he is an unrestricted free agent next summer.

The Pelicans have increased their win total in each of Willie Green's first three years in New Orleans. They have also had to fight for their playoff lives through the Play-In Tournament those years as well.

At what point is New Orleans willing to 'pay' to be a contender by acquiring more upper-echelon talent?

For now, the Pelicans seem willing to toy with the idea of staying under the tax to see what a healthy roster would look like. Despite Zion Williamson having the healthiest season of his career, he has not played in a playoff game.

Simply banking on perfect health may not be the answer for New Orleans. As the old saying goes, sometimes you have to pay to play.