It was an open secret at the 2026 NBA Trade Deadline that the first priority for the Denver Nuggets organization was to duck the luxury tax.
After putting together an impressive offseason, or at least what many thought would be an impressive offseason at the time, the Nuggets had 14 players on the roster and were expected to compete for a championship. There was an opportunity to add more depth to the roster in the form of a trade, but that wasn’t their biggest priority.
The only move the Nuggets ended up making at the trade deadline was to trade Hunter Tyson’s expiring contract, along with a future second round pick in 2032, for a 2026 second round pick this year. That has ended up as the 49th overall pick in the draft, joining Denver’s 26th overall pick in the first round.
That left Denver with 13 players on the roster, so they converted Spencer Jones to a full-time contract for the rest of the season and signed Tyus Jones to a prorated minimum contract. Spencer Jones ended up playing a significant role, but the Nuggets were unwilling to shell out a larger salary in an attempt to duck the tax. As a result, Jones will be a restricted free agent this offseason.
An opportunity existed for the Nuggets to try and upgrade. There weren’t many assets to do so, but the Nuggets still decided to maintain the status quo while making a coast cutting maneuver. In retrospect, it might’ve been a good idea for Denver to get more aggressive at the deadline given the absence of Aaron Gordon and Peyton Watson, both of whom were already injured when the trade deadline came and went.
Of course, we know how the season ended. The Nuggets were embarrassed in the first round by an injured team that still had the mentality and physicality to punish Denver’s lack. Would a trade deadline acquisition have helped? Maybe. It certainly would’ve been more expensive though, which is one of the reasons why it never happened.
Now that Denver’s in an uncomfortable place of change, ownership is in position to take charge of the direction of the team from a talent and financial perspective.
For the last few years, the Nuggets have paid the tax. In 2022-23, 2023-24, and 2024-25, the Nuggets paid the tax and even went reasonably far into the tax while the team had its best chance for a title. Of course, doing so has penalties beyond just money now after the owners (Stan Kroenke included) voted on restrictions for teams that spend excessive money into the luxury tax.
The rule that matters most for Denver is the repeater tax though. As it currently stands with just 10 players under contract in 2026-27, the Nuggets are staring at pretty significant repeater tax penalties. They’re just $12.7 million over the luxury tax line, but they will be asked to make over $41 million in luxury tax payments due to repeater rules.
Because for every dollar the Nuggets are over, they must make tax payments in higher and higher brackets.
That means that if the Nuggets give Peyton Watson a $20 million per year contract extension, draft the 26th overall pick, and sign three minimum contracts, they would be roughly $40 million over the luxury tax line and into the second tax apron. That would push them into the seventh level of the luxury tax payment bracket, or the seventh level of hell in the eyes of most owners. On top of about $240 million in salary, Denver would be on the hook for over $207 million in luxury tax penalties.
It would be incredibly surprising if the Nuggets were willing to pay that to keep this group together and simply hope for better health, especially after a first round exit.
Now, there are ways the Nuggets can both keep Watson and reduce their extended salary commitments, but that means changing things up. Jonas Valanciunas’ contract has a partial guarantee of $2 million, but the other $8 million isn’t guaranteed if Valanciunas is waived by July 8th. The Nuggets could also decline Jalen Pickett’s $2.4 million commitment, but that doesn’t clear up a ton of flexibility.
If the Nuggets are going to free up serious cap space to reduce their luxury tax bill, they have a clear pathway to do it: trade one or more of Jamal Murray, Aaron Gordon, or Cam Johnson.
In a season when Nikola Jokic is decided whether to sign a super max extension to remain committed to the Nuggets for the next half decade, it behooves them to ensure that trading players Jokic has won a title with and forged bonds beyond a simple work relationship isn’t going to royally piss off the superstar center. It will be Jokic who feels those effects most strongly, and putting him in the best and most positive spot to succeed has to be Denver’s top priority beyond simple luxury tax savings.
But the Nuggets do need to change things up. They need a refreshment of athleticism, energy, defense, ball handling, and more. All of those factors are connected, as Denver has crafted an offense upon the craftiness and high IQ play of Jokic, Murray, and Gordon for so long.
Peyton Watson, in theory, gives the Nuggets a window into all of those skill sets. He must continue to learn the poise and stability that comes with the incessant reps that Jokic, Murray, and Gordon have had together, but given time, he might blossom into a well-rounded starter. Is “might blossom” enough of a reason to sacrifice other parts of the core to free up salary to pay Watson? It’s a major leap.
The Nuggets could always let Watson go and try to recreate his skill set and potential impact with other cheaper players, but it puts pressure on Jokic, Murray, and Gordon to be perfect within their roles. That’s a tall task, especially after seeing the last few years go the way they’ve gone.
Whatever the case, it’s unlikely the Nuggets will remain the same. The luxury tax is a factor that a different ownership might be willing to stomach for longer, and Stan Kroenke might’ve been willing to continue paying a premium for championship caliber basketball in Denver.
Unfortunately, the Nuggets haven’t been championship caliber over the last three seasons, in part due to the unwillingness of ownership to retain players like Kentavious Caldwell-Pope and duck the tax at the deadline.
That’s going to cost the team and the fans, even if it saves ownership a little extra money on the side.
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