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Why the luxury tax is toothless

Discussion in 'NBA Dish' started by Will, Jun 2, 2000.

  1. Will

    Will Clutch Crew
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    according to Malcolm Gladwell's cover story at www.slate.com (where I work):

    "The second cap doesn't automatically apply to big spenders. It kicks in only when the total of all players' salaries exceeds 61.1 percent of total basketball revenues for that year. And that 61.1 percent is a very generous level. In all, it's never been breached. Last year—prorated for a full season—players' salaries were about 58 percent of revenue. This year, even after players' salaries jumped a whopping 18 percent in the off-season, the National Basketball Players Association estimates they'll reach only about 59 percent of revenue. It's possible, for course, that by 2001-2002, when the luxury tax kicks in for the first time, continued salary inflation will have pushed us above that mark. But that season, it should be pointed out, will be the fourth and final year of the NBA's television deal with NBC. And if, as expected, the next deal is more lucrative, the share of revenues taken up by salaries is going to fall again. The luxury tax may well only be a one-year phenomenon.

    The genius—if you want to call it that—of the Trail Blazers and the Knicks, in other words, is that they recognized, in advance of everyone else, that the luxury tax was essentially toothless. So long as most NBA teams exercise some restraint—which most owners clearly want to do—the system allows teams like the Knicks and Trail Blazers to spend all they want. The fact that the Clippers spend only $22.5 million and the Bulls spend $27 million means that Portland can get away with paying Damon Stoudamire $10 million a year and Jermaine O'Neal—Jermaine O'Neal!—$5 million a year. It's hard to comprehend just how idiotic this system is."

    (for more, see http://slate.msn.com/tagteam/entries/00-05-31_83462.asp)
     
  2. TheFreak

    TheFreak Contributing Member

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    So if there is a tax, it'll be on every team? So Portland can spend all they want, and the Clippers may end up paying for it? Sounds fair. That would also mean the luxury tax couldn't have been a factor in the Pippen trade, like we were told, right? We have the same likelihood of paying the luxury tax whether he's on the Blazers or the Rockets (not that that would affect the trade, just interesting). Am I reading this right? Looks like more execs than just the Wizards' might be pissed about Juwan Howard's contract. I also heard something about the league possibly taking an average of all the high-dollar contracts signed before the CBA (Howard, Garnett) and having them only count that much against the cap in the future...this would appear to make the luxury tax even less significant.

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    "Yes, I came from the 80s...but I didn't kill anybody. Give me a break."

    -Mike Tramp, former lead singer of White Lion
     
  3. Swopa

    Swopa Contributing Member

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    I find it appalling that Slate published a basketball article without insisting that you write it!

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