Pacers’ Refusal To Pay NBA’s Luxury Tax Could Be Their Achilles’ Heel

The Indiana Pacers are fresh off one of the most memorable playoff runs in recent NBA history. They repeatedly defied the odds and came within one game of winning this past season’s championship, but the good vibes around the team have already faded away.

First, star point guard Tyrese Haliburton tore his Achilles tendon in Game 7 of the NBA Finals, which figures to sideline him for the entire 2025-26 campaign. Things went from bad to worse when free agency began, as the Milwaukee Bucks stole starting center Myles Turner right from under the Pacers’ noses by signing him to a four-year, $107 million deal.

Ironically, an Achilles injury was also the impetus for Turner’s departure from the Pacers. To carve out enough salary-cap space to sign Turner, the Bucks decided to waive-and-stretch nine-time All-Star point guard Damian Lillard, who tore his Achilles against the Pacers in the first round of the playoffs.

With star forward Giannis Antetokounmpo reportedly “open-minded about exploring” his future this offseason, the Bucks felt pressure to make another big splash to convince him to stay in Milwaukee. Meanwhile, Haliburton’s injury seemingly changed how the Pacers were planning to approach the offseason.

Ahead of Game 2 of the Finals, ESPN’s Shams Charania reported that Turner and the Pacers had “mutual interest in getting a deal done” in free agency. He added that the Pacers had “determined that they will be entering the luxury tax next season for the first time in 20 years,” as they wanted “to keep this core intact and give this team a chance to make a real run not only this season, but for the next few seasons coming.”

One month later, Turner is now on a division rival, and the Pacers suddenly have a glaring question mark at center. Acquiring Jay Huff from the Memphis Grizzlies will give them more frontcourt depth, but they still don’t have an above-average starting center on their roster.

Luckily, the Pacers did reacquire their own 2026 first-round pick from the New Orleans Pelicans during the NBA Finals in exchange for the No. 23 overall pick in the 2025 draft. If they decide to intentionally take a gap year in the wake of Turner’s departure and Haliburton’s Achilles injury, they’ll now be able to reap the draft rewards. However, things won’t get any easier for them financially moving forward, and that’s before considering how they’ll find a long-term answer at center.

If the Pacers refuse to cross the luxury-tax line upon Haliburton’s return in 2026-27, they could effectively be trading an Achilles tendon for an Achilles’ heel.

New Tax Brackets

Most NBA teams are cowering in fear of the league’s new second apron, as teams that cross said line face punishing team-building restrictions. Among other things, they can’t take back more salary in a trade than they send out, can’t aggregate two smaller contracts in a trade to acquire a bigger salary and lose access to any mid-level exception in free agency.

The NBA’s latest collective bargaining agreement is effectively designed to force expensive rosters into difficult decisions in pursuit of more parity. However, it gave teams below either apron additional flexibility relative to what they had in the past. For instance, they can take back increasingly more salary than they send out in a trade—roughly $8.5 million more in most cases this season—as long as they don’t cross the first apron.

Beginning in the 2025-26 season, the NBA’s luxury-tax rates also became significantly less punitive for teams in either of the first two tax brackets. Teams that are no more than roughly $5.7 million above the tax line will pay only $1 per dollar that they owe in tax, whereas it was previously $1.50 per dollar. Teams in the next tax bracket—roughly between $5.7 million and $11.4 million—will owe only $1.25 per dollar instead of $1.75 per dollar.

It escalates quickly from there. Teams in the next tax bracket will owe $3.50 per dollar rather than the $2.50 they owed previously, and teams that are more than $17 million above the tax line will owe at least $4.75 per dollar rather than $3.25. Teams in the repeater tax—i.e., those that have paid the tax in at least three of the past four years—face even harsher rates, although the Pacers likely won’t need to worry about that until 2029-30 at the earliest.

Teams that cross the tax line do forfeit the distribution that they receive from taxpaying teams, which might have factored into the Pacers’ thinking. Rather than pay the tax for a team that isn’t likely to contend for a championship this year, they can treat this season as a retool year and collect an eight-figure payday from taxpaying teams in the meantime.

However, they might find themselves right back in this same dilemma next offseason.

The Pacers’ Outlook

With 15 players on standard contracts, the Pacers are now roughly $6.1 million below the $187.9 million luxury-tax line. They have yet to touch their $14.1 million non-taxpayer mid-level exception or their $5.1 bi-annual exception, but they figure to prioritize staying below the tax line for the 21st consecutive year.

The Pacers also need to keep an eye on their long-term outlook. Bennedict Mathurin’s extension negotiations this summer could prove particularly illuminating in that regard.

Mathurin became eligible for an extension at the start of the new league year. If he and the Pacers can’t come to terms on an agreement by the start of the regular season, he’ll become a restricted free agent next July.

Throughout his three years in Indiana, Mathurin has averaged a solid 15.9 points, 4.5 rebounds, 1.8 assists and 1.3 three-pointers per game while shooting 44.6% overall and 34.2% from deep. He started 49 games for the Pacers in the regular season this year and played nearly 30 minutes per game, although he came off the bench for all 22 of their playoff games this year and averaged only 17.5 minutes per game.

The Pacers already have Haliburton and Pascal Siakam signed to long-term max contracts that run for at least the next three seasons. They also have Andrew Nembhard and Obi Toppin under contract for the next three seasons, while Aaron Nesmith and T.J. McConnell are signed through at least the next two. If they pick up their team options on Jarace Walker and Ben Sheppard, they’ll already have roughly $182 million in salary on their books for the 2026-27 campaign, not including their 2026 first-round pick.

The NBA recently projected that the 2026-27 salary cap will land at roughly $165 million. If so, that would put the luxury-tax line at around $200 million, while the first apron would be in the neighborhood of $209 million and the second apron would be approximately $222 million. With 12 players under contract, not including Mathurin or a potential starting center, the Pacers would have less than $20 million to spend before crossing the tax line.

The non-taxpayer mid-level exception, which is projected to be $15.0 million in 2026-27, would wipe all of that wiggle room on its own. However, spending the non-taxpayer MLE hard-caps teams at the first apron, so the Pacers could spend no more than roughly $27 million on players beyond who’s currently signed through 2026-27.

The Pacers will have full Bird rights on Mathurin, which allows them to re-sign him to any contract up to a max deal even though they’re already over the cap. Re-signing your own free agent via Bird rights does not trigger a hard cap at either apron, so the Pacers would likely go that route with him rather than trying to goad him into taking the non-taxpayer MLE. But if they aren’t willing to cross over into luxury-tax territory upon Haliburton’s return in 2026-27, they’ll be forced into making difficult financial choices within the past 12 months.

Might they trade Mathurin rather than pony up for his next contract? If they do re-sign him, will Toppin ($15 million in 2026-27) or Nesmith ($11 million) become expendable? Would they look to move off Walker ($8.5 million) if he doesn’t make a larger impact in his third season? Or would they be open to an even harder reset around Haliburton by moving Siakam, who turns 32 in April?

There’s no rule stopping the Pacers from crossing into luxury-tax territory. They could even cross the first apron as long as they didn’t hard-cap themselves . That would give them a puncher’s chance of retaining the depth that helped them throughout their memorable playoff run.

But if they continue to balk at paying the tax, they might find it difficult to keep up with other title hopefuls even once Haliburton returns from his Achilles injury.

Unless otherwise noted, all stats via NBA.com, PBPStats, Cleaning the Glass or Basketball Reference. All salary information via Spotrac and salary-cap information via RealGM. All odds via FanDuel Sportsbook.

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