james harden has been the focal point of the NBA’s biggest in-season trade each of the past two years. He and the Philadelphia 76ers now find themselves months away from a truly fascinating offseason; Harden has a lucrative player option, and Daryl Morey has the opportunity to retool the franchise around the pairing of Joel Embid and Harden. This situation has some notable nuances that can be confusing, so this is a great time to put together a question-and-answer session addressing some of the key elements.
So, what is the deal with Harden’s player option?
It appears Harden neither picked up nor declined his $47.4 million player option for 2022-23 as a part of the trade-deadline megadeal, and that opens up flexibility for both sides. It also theoretically creates the chance he’ll opt out and leave, but that feels incredibly unlikely.
What is the most Harden can make, and how can that happen?
Typically, a player’s maximum salary on a new contract depends solely on his years of experience in the NBA and the salary cap amount for that season, with 25 percent, 30 percent and 35 percent of the cap serving as the three thresholds in the current collective bargaining agreement. At the $122 million cap projection for 2022-23, that would mean a $42.7 million starting salary for a player like Harden with 10 or more years of experience.
However, the CBA includes an exception to this framework for those at the very top of the salary scale; a player is allowed to get a 5 percent raise on his salary from the previous season, even if that puts him above the “normal” max line. Because Harden made $44.3 million in 2021-22, he is permitted to sign a new contract starting at $46.5 million, even though that is well over the 35 percent max. With the 76ers, that starting salary with 8 percent annual raises works out to a five-year, $269.9 million contract.
Now, you may be wondering, “Wait, that $46.5 million is less than Harden’s player option, right?” That is exactly the right thought. Though the CBA allows that special exception to the max for free agents coming off huge salaries, remember that Harden does not have to become a free agent this summer, and the per-season raise on his current contract is more than 5 percent. As such, the absolute most Harden could secure this offseason is via opting in and then extending off $47.4 million rather than $46.5 million. That leads to a maximum total contact value of $274.7 million over five seasons including the opt-in, about $5 million more than the other framework.
What if Harden is willing to take less than his absolute maximum? How would that work?
The CBA is pretty flexible when it comes to players making less than their richest possible deal, so a sub-max Harden contract could take many different forms. The important thing to remember is the first season of a new contract is key for setting the parameters. Because the 76ers have Harden’s Bird rights, they can start him at any salary from his minimum to that $46.5 million maximum. From there, that contract can increase or decrease by as much as 8 percent of that first-year salary in every subsequent year of the contract.
Let’s say Harden and Morey agree to a $40 million salary for 2022-23 as a part of a new contract. Eight percent of that is $3.2 million, so each season after the first one, his salary could increase up to $3.2 million from the previous year, decrease up to $3.2 million or land anywhere in between.
The biggest limitation with this is the 8 percent cap on year-to-year shifts, because that means the contract can have some ebbs and flows but not truly huge swings. Those swings can be used to accomplish other goals, like temporarily ducking the luxury tax or more dramatically lowering Harden’s salary late in the contract when his level of play will likely be well below the current standard. That matters far more to the 76ers than Harden, especially because the way negotiations may go is that they might hammer out the pure financial terms (years, dollars, guarantees, etc.) but then let Morey structure the deal in the fashion that makes the most sense with his vision for the team’s books.
Is there any other way Harden’s next contract could work?
Yes, and it is my absolute favorite structure if Harden is willing to take less than his maximum.
Above, I talked about the idea that Harden and Morey will focus their negotiation on the key pieces: how much money over how long, options and whether or not the whole contract will be fully guaranteed. In a scenario where Harden is willing to take meaningfully less than his maximum from him, the CBA’s 8 percent limit on year-to-year increases may limit Morey’s choices more than he would prefer. However, a Harden opt-in opens up another ambitious possibility: a version of super-frontloading Harden’s next contract where that $47.4 million option stays on the Sixers’ books but then future seasons drop off significantly. As discussed above, the CBA gives significantly more latitude when it comes to players taking less, and that really comes into play on extensions.
Theoretically, Harden’s salary could drop to whatever negotiated amount they wanted for 2023-24, then the 8 percent year-to-year restrictions would come in on that first new salary.
Let’s say, theoretically, Harden was willing to take $35 million per season over five years rather than his full maximum. On a brand new contract starting in 2022-23, that could look like this:
However, using the player option, the two sides could structure the same overall money this way:
That second path is preferable for Harden because he’d get more money sooner (especially considering the time value of money). It could potentially be better for the 76ers, too, as they would likely pay the tax in 2022-23, then avoid it as early as 2023-24 and move well clear of it in 2024-25 when Tobias Harris’ contract comes off the books — right ahead of a significant contract for breakout star Tyrese Maxey. Now, this requires Harden being willing to accept that lowered overall payout, and that may not be in the cards. Still, it is a fascinating hypothetical that could really change things for the franchise down the line.
What about the extend-and-trade rules?
This CBA rule only comes into play if Harden opts in, because extend-and-trade restrictions do not affect free agents signing contracts less than six months after they were traded to their new team. However, if Harden opts in and the two sides build an extension off that, they can only temporarily add up to two new seasons and do up to 5 percent raises on that $47.4 player option. Again, the CBA is on board with a player making a lower salary but the limitation of two new seasons presumably makes any immediate extension untenable, though only for part of the offseason.
That said, because extend-and-trade restrictions last six months after the transaction, Harden and the 76ers cannot formally put pen to paper on a higher-end extension built off that opt-in until August 10, 2022. However, the two sides can absolutely come to an understanding of what that contract would look like, and, in fact, they would have to do so because Harden’s player option decision comes before the league year turns over in July. Still, that is a temporary inconvenience rather than a limitation.
What about the Over-38 rule?
Harden can thank former teammate Chris-Paulas the previous CBA limited contracts for players as they approached their age-36 season, but the players pushed that back to 38. Since Harden is 32 now and does not turn 33 until August, the over-38 rule would not affect him.
What about if Harden leaves this summer? What flexibility do the 76ers have then?
If Harden opts out and signs elsewhere as a free agent, the 76ers take his money off their books but the significant obligations to Embiid and TobiasHarris mean they only create a modest amount of cap space: $15-25 million depending on Danny Green’s $10 million non-guaranteed contract, unless they clear additional space by trading players with guaranteed salaries. That is enough to add someone who will help, especially if Morey can clear some more space, though this is an extremely weak free-agent class. Instead, the more likely time to make a non-Harden splash would be 2023, when Harris has an expiring contract and Maxey has not begun his next deal.
There is also a possibility that Harden leaves via sign-and-trade, which creates a massive trade exception and/or sends players to Philadelphia. In that scenario, Morey presumably stays over the cap either with those new players or by wielding the trade exception, but the problem there is that you still have to find and acquire a new player with the exception, likely using assets to entice that trade partner into sending out someone.
(Photo by James Harden: John E. Sokolowski/USA Today)