The Denver Nuggets avoided the NBA's luxury tax threshold for the 2025-26 season by cutting salary. They started with the trade that sent Michael Porter Jr. to the Brooklyn Nets for Cameron Johnson, and ended with a salary-dump trade of Hunter Tyson at the trade deadline to seal the deal. They avoided the extra taxes that the repeater label brings, and to avoid it again, they could miss out on Peyton Watson.
The Nuggets did pay the luxury tax in their championship-winning season of 2022-23, and for the following two seasons as well. But by being in the tax for consecutive years, the Nuggets were paying extra fees to be over the threshold. In total, they paid about $58 million over those three years. Not a small amount, but small for a billionaire ownership group.
The right move is to pay the taxes to keep a contender around Jokic
Now is not the time to pinch pennies to deplete the roster around Nikola Jokic, and that includes not re-signing Peyton Watson in free agency. But a team could overpay for Watson, knowing the Nuggets are likely to avoid the stiff repeater penalty that comes with going over the luxury tax. But it would be the wrong move for the Nuggets not to match the restricted free agent.
Paying the tax doesn't guarantee a championship, but it certainly helps. There are some exceptions, like the 2024-25 champion Oklahoma City Thunder. On the other hand, the 2021-22 Golden State Warriors incurred a whopping $170 million-and-change tax bill to win the championship. The Dwayne Wade, LeBron James, and Chris Bosh Heat paid the tax in back-to-back years for their championships.
Overall, there have been nine champions since 2011-12 that have paid the luxury tax bill, and five that have not. The Nuggets would be taking a step backward with the roster by trading away players like Aaron Gordon or Cameron Johnson in salary dumps. That doesn't bode well for getting the Nuggets and Nikola Jokic back to the Finals anytime soon if that is the route the Nuggets take, not with the way the San Antonio Spurs and New York Knicks look right now.
One more champion could get added to the list
And if the Knicks win the championship this year, you can add them to the list of teams that have paid the luxury tax to win. Their estimated tax bill for this year alone is just over $45 million. The Nuggets owners have some of the deepest pockets in sports. It would be nice to see them spend it to keep the best team they can around their three-time MVP Jokic.
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