Denver traded breakout forward Peyton Watson to Cleveland in a sign-and-trade to avoid extreme luxury-tax penalties. Retaining Watson on his new four-year, $88 million deal would have triggered a tax hike exceeding $150 million, a financial burden the Nuggets were unprepared to shoulder despite his impressive production.
The Denver Nuggets' decision not to retain Peyton Watson on a $22 million salary was driven by far more than the value of his contract itself.
According to ClutchPoints' Brett Siegel, Denver's existing luxury-tax situation meant paying Watson $22 million would have caused the Nuggets' projected tax bill to explode drastically.
"For those asking why the Nuggets wouldn't just keep Peyton Watson for $22M - it's because that $22M would've resulted in Denver's tax bill jumping from $68M to over $220M," Siegel reported.
Combined with the team's payroll, Denver would have been approaching $500 million in total salary and luxury-tax expenses for the 2026-27 season.
"A near $500M season between taxes and payroll just wasn't something the Nuggets were prepared to do," Siegel added.
Previous calculations from ESPN's Bobby Marks similarly showed how dramatically Watson's contract would affect Denver.
Even if he had played next season on his $6.5 million qualifying offer, the Nuggets' estimated tax bill would have increased from $68 million to approximately $112 million. A salary around $23 million was projected to push the tax alone to roughly $231 million.
Peyton Watson
Peyton Watson
Peyton Watson
Watson leaves after breakout season
The financial reality helps explain why Denver ultimately allowed one of its most promising young players to leave despite his breakout 2025-26 campaign.
Watson averaged career highs of 14.6 points, 4.9 rebounds and 2.1 assists in 54 games while shooting 41.1% from three-point range.
The 23-year-old is now heading to the Cleveland Cavaliers in a sign-and-trade and will sign a four-year, $88 million contract - an average of exactly $22 million per season. Denver receives an unprotected 2031 first-round pick and a future second-rounder as part of the transaction.
For Denver, therefore, the issue was not simply whether Watson was worth $22 million annually. Because of the Nuggets' expensive roster and escalating luxury-tax penalties, keeping him at that number would have carried a real cost several times larger than his actual salary.
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