The Philadelphia 76ers and James Harden have finally agreed on a contract extension for the 13-year veteran. According to Adrian Wojnarowski, he will re-sign with the Sixers on a two-year, $68.6 million contract with a player option for year two. This might be Harden’s temporary financial sacrifice, allowing the Sixers to make moves that increase their championship chances.
When the Sixers acquired Harden, it was rumored that he intended to exercise his $47.4 million player option as part of the transaction. If he had opted in, he could have signed a four-year, $222.8 million contract extension with the Sixers, totalling $270 million over five years. He could also have opted out and re-signed for a total of five years, $269.9 million, which is basically the same as the five-year maximum he could have made in an opt-in-and-extend. Instead, he chose to opt out and resign on a $33 million beginning salary, a $14.4 million pay drop. This was done to assist the Sixers in making further moves to enhance their squad.
Because Harden accepted a big pay reduction from his $47.4 million salary, the Sixers qualified for the non-taxpayer mid-level exception of $10.5 million and the bi-annual exception of $4.1 million. They signed PJ Tucker to a three-year, $33 million contract and Danuel House to a two-year, $8.4 million contract using the non-taxpayer mid-level exemption.
If Harden had declined his $47.4 million player option, they would have been confined to the $6.5 million taxpayer mid-level exception as their primary way of improving the squad. This is due to teams being susceptible to the hard cap if they utilize more than the taxpayer mid-level exemption amount or the bi-annual exception. Had Harden opted in and the Sixers used up their full taxpayer mid-level exception, they would most likely be looking at a luxury tax payment in the $15 million bracket.
Harden’s wage drop provided the Sixers with enough leeway below the $156.98 million apron to spend the whole non-taxpayer mid-level and bi-annual exception on Tucker and House. They could have signed House using the taxpayer mid-level exception, but they wouldn’t have been able to give Tucker more money than the Heat could.
The Sixers are now $3.5 million above the luxury tax, for a total tax payment of $5.2 million, and $3.2 million below the hard ceiling. However, they are functionally $4.7 million below the hard limit since they need to reduce to 15 players, which may be accomplished by releasing one of their non-guaranteed players. They could easily avoid the luxury tax by dismissing many non-guaranteed players or dealing a rotation player in the middle of the season, but it seems unlikely given that they need the best possible squad to contend this year.
Harden could have signed a five-year, $191.4 million contract with a starting salary of $33 million. Instead, he may reject his player option in 2023 and re-sign with the Sixers for up to five years, with a salary of $270 million expected following season. While he may not get the whole amount, a great season might put him in line for a near-maximum deal, particularly because the Sixers will be unable to replace him if he departs. Alternatively, the player option shields him against a bad year or a catastrophic injury.
Harden will have veto power over a trade in 2022-23 since he re-signed for just one season without an option year. This is due to the fact that if he accepts to be moved, his Bird rights will return to Non-Bird. That means that if he is dealt, his new club will be restricted to re-signing him to a four-year, $141.9 million contract rather than the maximum, unless they have the budget room to pay him more.