The $177 Million Tax Bill That Could Push Peyton Watson to the Clippers

The Los Angeles Clippers have spent this offseason getting younger without completely blowing up the roster. And it looks like they might not be done yet.

For weeks now, there’s been chatter connecting them to Peyton Watson, the Denver Nuggets’ restricted free agent wing. ESPN’s Ohm Youngmisuk reported that the Clippers have interest, though the Nuggets can match any offer sheet and have said publicly they want to keep him. But here’s where it gets messy for Denver.

The Nuggets have options. They could trade someone like Christian Braun, Aaron Gordon, or Cam Johnson to clear room. But no deal has materialized yet. And if they can’t find a trade partner, the alternative is brutal.

According to Altitude TV’s Vic Lombardi, citing cap expert Bobby Marks, if the Nuggets simply waive a player like Valanciunas and sign Watson to a $25 million per year deal, they’d get hit with a $177 million tax penalty. That’s the repeater tax. One hundred seventy seven million dollars. For one player.

The Nuggets obviously don’t want to do that. Which is exactly why the Clippers might have a real shot here. If Denver isn’t willing to eat that kind of tax bill — and they shouldn’t be, that’s insane — then Watson could be available via a sign-and-trade. Or the Clippers could just wait for the Nuggets to blink.

Watson is exactly the kind of 3-and-D wing the Clippers need. He’s long, athletic, and has shown flashes of being a real perimeter defender. On a team that’s now built around Darius Garland and Brandon Ingram after the Paul George departure and the Kawhi Leonard uncertainty, adding a guy who can guard multiple positions and knock down open threes makes a lot of sense.

One thing worth watching: the Nuggets have been stubborn about keeping their young guys before. They matched offers for other players in the past. But $177 million is a different kind of problem. That’s not just a luxury tax hit. That’s a franchise-altering financial commitment for a guy who hasn’t proven he’s a starter yet.

The Clippers don’t have to rush. Restricted free agency can drag out. But if Denver can’t clear enough cap space through a trade, and they’re staring at that $177 million number, Watson might end up in L.A. sooner than later.