The Nuggets want to keep Peyton Watson, but his next contract could push Denver's tax bill from $68 million to as much as $231 million, creating a potential $500 million roster problem while the Bucks and Clippers remain threats.
The Denver Nuggets want to keep Peyton Watson, but doing so could come with an enormous financial cost.
According to ClutchPoints' Brett Siegel on the Clutch Scoops podcast, Denver remains interested in retaining the restricted free agent forward, but the team's tax situation has become increasingly complicated after already moving into the second apron.
"They want to keep Peyton Watson," Siegel noted.
The issue is not only Watson's contract, but what that deal would do to Denver's luxury tax bill.
Siegel explained that after the Nuggets matched Spencer Jones' offer sheet from the Oklahoma City Thunder, their projected tax bill jumped from around $32 million to $68 million.
That also pushed Denver into the second apron, making potential sign-and-trade scenarios even harder.
"By keeping Spencer Jones… their tax bill jumped from, I believe it was like $32 million to $68 million," Siegel said. "And they moved into the second apron."
Watson could explode Denver's tax bill
Watson's situation could push the Nuggets into a completely different financial tier.
According to Siegel, if Watson simply took his $6.5 million qualifying offer, Denver's tax bill would still jump significantly.
"If Peyton Watson was to take that $6.5 million qualifying offer… their tax bill jumps to $112 million," Siegel said.
However, a long-term deal at the number Watson is reportedly seeking would be far more expensive for the Nuggets.
"If they sign him to a $23 million contract, which is around the range that people think that Peyton Watson should get right now… their tax bill goes from $68 million to $231 million for the 26-27 season," Siegel said.
That would put Denver in one of the most expensive roster situations in the league.
"When you combine that with their total payroll, which would be about equal to that, maybe a little bit more in that $240-$250 million range, you're talking about a $500 million roster between payroll and taxes just to keep Peyton Watson on a deal that he wants," Siegel said.
For a Nuggets team built around Nikola Jokic and Jamal Murray, the number is massive.
Siegel also noted that Denver has not historically been a huge tax-paying franchise, making the potential jump even more striking.
Nuggets still value Watson, but price is issue
The Nuggets' problem is that they do not have an easy way to replace Watson if he leaves.
Denver still views him as an important piece of a team that believes it can compete for a championship if healthy. But because of the second apron, the Nuggets' options are limited.
Sign-and-trade possibilities have become more complicated because Denver would have to take back less money and move out of the second apron. That makes any deal involving Watson more difficult to construct.
There has also been uncertainty over what Denver has actually offered. Siegel mentioned previous talk at Summer League of a possible $19 million to $21 million annual range, while other reports had Denver closer to $14 million to $16 million per year.
Watson, meanwhile, appears to be looking for a much higher number, with the market viewed closer to the low-to-mid $20 million range.
Bucks and Clippers remain major threats
The Nuggets also face outside pressure.
Siegel said Watson has explored value on the open market with teams such as the Los Angeles Clippers, Milwaukee Bucks, and Atlanta Hawks.
"He was also exploring that kind of value on the open market with teams like the Clippers, the Milwaukee Bucks, the Atlanta Hawks," Siegel said.
However, Atlanta has reportedly backed off to some degree.
"Of those three teams, the Atlanta Hawks are a team that's kind of backed out a little bit," Siegel said. "They're still in the mix for Peyton Watson, but not as much."
That leaves the Clippers and Bucks as two teams to watch.
"That kind of leads it to the Clippers and Bucks," Siegel said.
The Clippers' situation is still tied to the ongoing Kawhi Leonard investigation, which has held up potential moves. Milwaukee, however, appears to be more directly positioned in the Watson race.
"From the Bucks' perspective, they're certainly a team that is at the forefront of these conversations," Siegel said. "They're a team that can easily make this happen."
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