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2018 Salary Cap Analysis
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<blockquote data-quote="HardRightEdge" data-source="post: 757298"><p>It's worth taking a moment to consider the implications of the Adams and Linsley extensions executed in 2017. overthecap.com indicates the contracts were signed on 12/30/17, a date that might be quite telling.</p><p></p><p>Adams signing bonus was for $18 million. That bonus is prorated over 5 years, 2017 - 2021, for cap purposes, with a $3.6 million cap hit per year.</p><p></p><p>Since the $3.6 million allocated to 2017 would have been rolled over anyway had this not been an extension, the effective signing bonus cap hit for 2018 is $7.2 million when compared to a 4 year deal starting in 2018 under the same terms.</p><p></p><p>However, had this $18 million signing bonus been included in a 4 year deal starting in 2018, the $18 million would have been prorated over 4 years at $4.5 million per year.</p><p></p><p>Consequently, the actual $7.2 million signing bonus proration for 2017+2018 vs. a $4.5 million proration for a 4 year 2018-2021 contract under the same terms results in a $2.7 million loss in 2018 cap space.</p><p></p><p>In short, by inking this extension in 2017, $2.7 million in cap hit was accelerated from the out years back into 2018.</p><p></p><p>Somebody else can do the same math on Linsley's deal.</p><p></p><p>Why would the Packers do such a thing in a year when cap space is tight? Are the Packers planning to avoid free agency, stay the course, and assume the guys on rookie contacts will progress along with the upcoming draft class providing a sufficient performance upgrade? </p><p></p><p>That would be an odd assumption given the disposition of the guy who actually drafted these players. A new GM is likely to be given the authority to make significant roster changes otherwise why kick Thompson upstairs or sideways, as the case may be.</p><p></p><p>The more I think about it, the more plausible it becomes to me that this is The Green Bay Packers, Inc. capturing federal income tax savings by getting these deals signed in 2017 as I've mentioned before.</p><p></p><p>The corporate tax rate for 2017 is 35%. It will be dropping to 21% under the recently signed federal tax cut bill. If the Packers effective tax rate matches these rates, then accelerating Adams' $18 million expense into 2017 as a deduction from earnings represents a tax savings of $6.3 million. If that same $18 million was used as a deduction in 2018 at the 21% tax rate, the value of the deduction is only $3.8 millon. Under this scenario, The Green Bay Packers, Inc. save $2.5 million in cash money over the next 2 years at the expense of pushing $2.7 mil in cap space out to subsequent years.</p><p></p><p>From a bean counter perspective this is a no brainer since that's $2.5 million in real dollars whereas the cap dollars merely deferred, not lost. But this scenario does not indicate any urgency to stockpile cap for 2018 free agent forays.</p><p></p><p>Somebody else can do the tax math for the Linsley contract.</p><p></p><p>Since the explanation that Demovsky presented is a statement of a fact, not an explanation for extending these these guys post haste back into a season already over in light of cap carryover, I would love one of our erstwhile beat reporters to pose the question in these terms to Murphy. I'm not holding my breath.</p></blockquote><p></p>
[QUOTE="HardRightEdge, post: 757298"] It's worth taking a moment to consider the implications of the Adams and Linsley extensions executed in 2017. overthecap.com indicates the contracts were signed on 12/30/17, a date that might be quite telling. Adams signing bonus was for $18 million. That bonus is prorated over 5 years, 2017 - 2021, for cap purposes, with a $3.6 million cap hit per year. Since the $3.6 million allocated to 2017 would have been rolled over anyway had this not been an extension, the effective signing bonus cap hit for 2018 is $7.2 million when compared to a 4 year deal starting in 2018 under the same terms. However, had this $18 million signing bonus been included in a 4 year deal starting in 2018, the $18 million would have been prorated over 4 years at $4.5 million per year. Consequently, the actual $7.2 million signing bonus proration for 2017+2018 vs. a $4.5 million proration for a 4 year 2018-2021 contract under the same terms results in a $2.7 million loss in 2018 cap space. In short, by inking this extension in 2017, $2.7 million in cap hit was accelerated from the out years back into 2018. Somebody else can do the same math on Linsley's deal. Why would the Packers do such a thing in a year when cap space is tight? Are the Packers planning to avoid free agency, stay the course, and assume the guys on rookie contacts will progress along with the upcoming draft class providing a sufficient performance upgrade? That would be an odd assumption given the disposition of the guy who actually drafted these players. A new GM is likely to be given the authority to make significant roster changes otherwise why kick Thompson upstairs or sideways, as the case may be. The more I think about it, the more plausible it becomes to me that this is The Green Bay Packers, Inc. capturing federal income tax savings by getting these deals signed in 2017 as I've mentioned before. The corporate tax rate for 2017 is 35%. It will be dropping to 21% under the recently signed federal tax cut bill. If the Packers effective tax rate matches these rates, then accelerating Adams' $18 million expense into 2017 as a deduction from earnings represents a tax savings of $6.3 million. If that same $18 million was used as a deduction in 2018 at the 21% tax rate, the value of the deduction is only $3.8 millon. Under this scenario, The Green Bay Packers, Inc. save $2.5 million in cash money over the next 2 years at the expense of pushing $2.7 mil in cap space out to subsequent years. From a bean counter perspective this is a no brainer since that's $2.5 million in real dollars whereas the cap dollars merely deferred, not lost. But this scenario does not indicate any urgency to stockpile cap for 2018 free agent forays. Somebody else can do the tax math for the Linsley contract. Since the explanation that Demovsky presented is a statement of a fact, not an explanation for extending these these guys post haste back into a season already over in light of cap carryover, I would love one of our erstwhile beat reporters to pose the question in these terms to Murphy. I'm not holding my breath. [/QUOTE]
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