Larry Coon, creator of the salary cap FAQ, discussed whether or not Jerome James' salary could be excluded from the luxury tax on the realgm forum.
For the first question -- the salary counts. It doesn't matter whether
insurance is paying it. The team can apply to have the salary removed,
after a year waiting period.
For the second question -- the
Board of Governors can exclude the salary of disabled players from the
luxury tax, and typically does so.
If this pans out, this is amazingly good news for the Bulls. It means that the Bulls would actually have about eight million dollars underneath the luxury tax threshold after signing their draft picks.
That would give them enough room to sign and keep Ben Gordon without the tax getting in the way. I've asked Larry a follow up question, about whether the same benefit could be carried over to a team if there's a trade. If so, that would really enhance his value in a trade to a team like Phoenix that would love to get under the tax.
Of course, it's no guarantee that Jerome James' will be viewed as medically retired this year. The Bulls still need to hope on that count. However, if he is, then the Bulls will be in good shape salary wise to improve the team.