What is the luxury-tax apron, and why should Sixers fans care?

It took nearly three weeks, but we finally know the terms of James Harden’s new contract with the Sixers. He’s signing a two-year, $68.6 million contract with a $33 million salary this season and a $35.6 million player option in 2023-24, according to ESPN’s Adrian Wojnarowski.

Harden’s 2022-23 salary was the final piece to the Sixers’ offseason puzzle, as it will influence any other moves they can make this summer and throughout the regular season.

Teams that use the non-taxpayer mid-level exception, the bi-annual exception or receive a player in a sign-and-trade become hard-capped, which means they are not allowed to exceed the luxury-tax apron at any point through the rest of that league year. The Sixers used the non-taxpayer MLE to sign P.J. Tucker and the bi-annual exception to sign Danuel House Jr., which means they can’t have more than $156,983,000 in salary on their books at any point between now and June 30.

The Sixers currently have 16 players under contract for roughly $153.6 million. In theory, that leaves them about $3.4 million below the apron. However, Trevelin Queen, whom they signed to a two-year minimum deal with $300,000 guaranteed, counts as $1.8 million for apron purposes (the minimum salary for a veteran with two years of NBA experience) rather than $1.6 million (his actual salary in 2022-23). That means the Sixers have only $3.2 million in wiggle room under the apron right now.

The Sixers could open more space under the apron before the regular season begins. While they can carry 20 players on their roster during the offseason, they’ll have to cut down to 15 (not including their two players on two-way contracts) by opening night. Queen and Isaiah Joe, whose $1.8 million salary is fully nonguaranteed until late October, might be battling for that final roster spot in training camp and the preseason.

It might not come to that, though. Wojnarowski noted that Harden’s decision to decline his player option could give the Sixers “flexibility to make deals once this coming season is underway.”

Harden could have taken more than $36 million as his salary for the 2022-23 season before the Sixers bumped into the apron. His decision to instead take $33 million gives them additional freedom to make moves throughout the season. It’s hard to imagine him making such a sacrifice and the Sixers not taking advantage of that extra flexibility at some point.

If, for instance, they’re looking to poach Patrick Beverley or Jordan Clarkson from the self-destructing Utah Jazz, they’d have to swing a three-for-one deal including Furkan Korkmaz, Matisse Thybulle and any one of Joe, Shake Milton, Jaden Springer, Paul Reed or Charles Bassey. Doing so would push them even closer to the apron, and that’s before factoring in the veteran-minimum signing they’d likely make to round out their roster.

Being hard-capped could prevent them from filling out that 15th spot right away, though. If they traded Korkmaz, Thybulle and Milton for Beverley, for instance, they would be only $1.6 million below the apron. Since rookies and free agents with one year of experience count as the two-year minimum salary ($1.8 million) for apron purposes, the Sixers would not be able to sign someone right away without making an additional move. Swapping out Milton for Springer in the above scenario leaves them with $1.7 million in room under the apron, which again wouldn’t be enough for a veteran-minimum contract right away.

Minimum contracts do begin to prorate once the regular season begins based on how many days are remaining in that season. The Sixers could go into the season with 14 players (plus their pair of two-way contracts) and then fill out the 15th spot once the minimum salary has prorated enough to fit under the apron. However, that would leave them with virtually zero flexibility to make additional in-season moves in which they take back more salary than they send out.

Any hypothetical trade idea for the Sixers this season will have to take the apron into account. Even if they wind up waiving Joe or Queen, they’ll still have no more than roughly $5 million in breathing room under the apron. That complicates the pursuit of someone making $18-20 million (Eric Gordon, Bojan Bogdanovic, etc.) unless they send out Tobias Harris as part of the deal, as they couldn’t swing a five-for-one trade and have enough space under the apron to fill out their roster with minimum signings.

“They want Eric Gordon, but none of that can happen unless they find a place for Tobias Harris,” an Eastern Conference executive recently told Heavy.com’s Sean Deveney. “And they have exhausted every avenue on a Tobias deal. They overpaid him and no one wants that contract. That’s just the situation they’re in.”

By taking $14.4 million less than his player option, Harden gave the Sixers enough space under the apron to use both the non-taxpayer MLE and bi-annual exception, which allowed them to sign Tucker and House. However, using those exceptions will limit what they can and can’t do between now and June 30.

That was a worthy sacrifice compared to the alternative—they could have avoided being hard-capped by only using the $6.5 million taxpayer mid-level exception—but it will complicate their ability to pursue major additional upgrades over the coming months.

Unless otherwise noted, all stats via NBA.com, PBPStats, Cleaning the Glass or Basketball Reference. All salary information via Spotrac or RealGM.