Next Contract Series: James Harden
A lot has changed since we wrote about James Harden and his contract situation last year. Harden opted out of his deal after being traded to the Philadelphia 76ers, which was expected. What wasn’t expected was he then took less money in a new deal, which allowed Philadelphia to bring in both P.J. Tucker and Danuel House Jr. In exchange for that goodwill, Harden only signed a two-year deal with a player option for next season.
That all made sense. Harden made a short-term sacrifice, knowing a long-term deal would be waiting for him this summer. He’d still get a max contract, the Sixers added some key rotation players and Philadelphia would move forward with a veteran core for at least the foreseeable future.
Or so we thought.
Around Christmastime, buzz began to build that Harden was interested in returning to the Houston Rockets in free agency. Over the last few months, that buzz is now as prevalent as the droning hum of dragonflies on a summer afternoon.
It might seem ludicrous that a 14-year veteran might leave a title contender for one of the worst teams in the league. But this is the NBA. Ludicrous things happen all the time in this league.
Reports are that Harden loves Houston. And it’s not an unrequited love either. Houston loves Harden right back. Sometimes comfort is worth more to a player than contention or money.
And, due to a quirky rule in the CBA, the money might not even be all that different for Harden if he leaves the 76ers for the Rockets this summer. Let’s dive in.
The Veteran Extension
We’re only listing this to say that Harden is not extension-eligible. Because he opted out of his old deal and signed a new contract this summer, Harden is not able to extend with the 76ers. That’s one potential retention tool that has been taken off the table.
Re-signing with the 76ers as a free agent
Maybe the noise about James Harden and Houston is just that: noise. Maybe he has no intentions of leaving Philadelphia, where Beard aficionado Daryl Morey runs the show and Harden has teamed with Joel Embiid to form one of the league’s best duos.
The max Harden can effectively get from the Sixers projects as follows:
- 2023-24: $46,900,000
- 2024-25: $50,652,000
- 2025-26: $54,404,000
- 2026-27: $58,156,000
- Total: four years, $210,112,000
That’s the 35% of the cap maximum Harden is eligible for as a player with 14 years of service. It also includes 8% raises off the projected first-year salary of $46.9 million.
You might be wondering why Harden is effectively capped at a four-year deal, when a player re-signing with Bird rights can sign for five years. Here’s where that CBA quirk of the “Over-38” rule comes into play.
Harden will turn 34 this summer. That means a five-year deal would carry him from his age-34 through age-38 seasons. That makes that final season subject to the Over-38 rule.
Now, it’s important to note that nothing prevents Philadelphia and Harden from signing a five-year deal. It would just have to be for less than the max (by a pretty large margin, because of the way cap hits work on a deal impacted by the Over-38 rule).
What happens with the Over-38 rule is that the assumption is that a player will be retired by the time they hit 38 years old (Yes, several players have tested these assumptions in recent years. Enough so that this rule has been tweaked from Over-35 to Over-36 and now to Over-38 in recent CBA negotiations). In Harden’s case, that would be on a presumptive fifth season. In this case, the salary for that fifth season would be treated as deferred compensation. The salary from that fifth season would be divided up (as percentage of the total salary) and spread across the first four seasons of the contract.
In Harden’s case, he’s presumably still a max salary player. Because no player is allowed to earn more than their individual maximum amount in first-year salary, there is nowhere to put that deferred compensation. Thus, the contract would be deemed invalid. Harden would have to take less in base salary each season, to allow for the money from the fifth season to be spread across the first four season. In that case, it would bring us right back to the $210 million amount he can get in a straight four-year, max deal.
There are ways to work around the Over-38 rule and to still sign a five-year deal, but all would involve Harden taking far less than the maximum he’s eligible for. That doesn’t seem realistic, even despite last summer’s Sixers-friendly maneuvering.
Signing with another team as a free agent:
We’ll leave this open to James Harden signing with any other team, even if all signs point to that “other” team only being the Rockets, should Harden leave the 76ers. If he leaves Philadelphia, here’s what Harden is eligible to sign for elsewhere:
- 2023-24: $46,900,000
- 2024-25: $49,245,000
- 2025-26: $51,590,000
- 2026-27: $53,935,000
- Total: four years, $201,670,000
That’s the same 35% max in first-year salary, but it’s capped at 5% raises and only four years. And that removes the Over-38 rule from the equation entirely, as Harden would be in his age-37 season in the final year of this deal.
We can debate if Houston should be investing most of their cap space in a Harden reunion at another point, should it come to pass. The main takeaway? The Rockets currently project to have $56.2 million in cap space this summer. That’s enough for Harden and some leftover cap room. Mostly: the path for Houston to bring Harden home is not only open, it’s completely free and clear cap-wise.
James Harden opted out of $47.4 million for this season with Philadelphia 76ers and re-signed for $33 million. We can take the player option out of the mix for next season, because that was never realistically getting picked up barring Harden getting seriously injured or his game falling apart. Neither of those have happened, so we can confidently say he sacrificed $14.4 million for this season.
Because we’re working under the assumption that Harden is still a max player, that was a one-year sacrifice, should he stay in Philadelphia. If he leaves the Sixers, Harden would be giving up a further $8.5 million.
That’s a total of about $23 million Harden would have given up, should he leave for Houston or elsewhere. For a player who has already banked in excess of $300 million, and probably has over $200 million still to come, it’s not exactly inconceivable that Harden would leave the 76ers for another team. Fully maximizing his earnings don’t seem to be a real motivation.
The Over-38 rule is obviously a complicating factor here. It removes what would have been Philadelphia’s biggest advantage: a fifth year at $61.9 million. With that off the table, an $8.5 million salary deficit spread over four years isn’t going to make a difference.
One other thing to note: If Harden is willing to take less than max money, that probably increases Houston’s chances of landing him. That would allow the Rockets to have even more cap space to work with to add talent around Harden in a homecoming. In Philadelphia, taking less really just delays a tax bill or lessens it. That’s good, but it’s not quite the same as the flexibility gained while building something new in Houston.
This seems like it will come down to Harden’s desire to remain on a readymade contender in Philadelphia. The Sixers can offer him a four-year deal which would tie him to the franchise for the same amount of time as Joel Embiid. That’s a good a start toward being a title contender for at least the next few years.
Yet, there’s a ton of smoke coming from Houston. And where there is that much smoke, there’s often fire. It’s been so well reported that Harden still considered Houston to be home, that there’s something there. If the Rockets give him most of their cap space, and then package some of their kids together in smart trades, they could be a playoff team next season.
James Harden isn’t MVP of the NBA James Harden anymore. Those days are over, but he should have been an All-Star this season. Harden is still good enough to be a featured attraction on a playoff team. At the end of the day, maybe just being a playoff team and the love showered upon him from Houston is enough for Harden to finish out his career in comfort.