Luxury Tax

JuanValdez · Jul 9, 2008

I thought it was interesting to see what teams had to shell out for last season. Are any of these teams expecting to be out of luxury tax territory this coming season?

http://sports.espn.go.com/nba/news/story?id=3480247

Knicks top list of eight teams that must pay luxury tax
By Marc Stein
ESPN.com

Eight NBA teams were officially notified of their luxury-tax obligations for the 2007-08 season via league memorandum in the early minutes of Wednesday morning, with the New York Knicks again topping the list of taxpayers.

Teams with a payroll above $67.865 million last season are required to pay one tax dollar for every dollar they sit over the threshold. That total, for the Knicks, is nearly $20 million -- $19,723,946 to be exact.

But the Dallas Mavericks, after their midseason acquisition of Jason Kidd, wound up only about $100,000 away from the Knicks in tax terms with a bill of $19,613,295.

The other six taxpayers from last season are the Cleveland Cavaliers ($14,008,561), Denver Nuggets ($13,572,079), Miami Heat ($8,318,879), Boston Celtics ($8,218,368), Los Angeles Lakers ($5,131,757) and Phoenix Suns ($3,867,313).

Each of the eight teams will receive formal invoices by Friday and must remit their tax payments in full to the league office by July 23.

The 22 teams that don't owe any tax, in accordance with the league's collective bargaining agreement, will each receive 1/30th of the $92,454,198 total tax pot. That computes to $3,081,807 per franchise.

The remaining $24.7 million of "undistributed tax funds" and an additional $5.3 million from "league entities," according to an official NBA memo, will be used to fund assistance payments to teams for the 2008-09 season. The league's Revenue Assistance Plan stipulates that $30 million will be distributed to "low-revenue teams."

The good news for the Knicks is that their tax bill is less than half of what it was last summer, when they were forced to pay more than $45 million in luxury tax. They have missed the playoffs for four consecutive seasons and averaged 28 victories in that span, costing Isiah Thomas his dual roles of coach and team president.

The gap between the Knicks and the next closest tax team a year ago -- also Dallas -- was nearly $38 million.
Click to expand...

baller4life315 · Jul 9, 2008

Nice find. I never knew how the taxed money was allocated amongst NBA teams and in what percentages.

yaoluv · Jul 9, 2008

Thanks Cuban!

SuperS32 · Jul 9, 2008

The 1/30th split is one of the main reasons why teams try so hard stay precisely under the tax threshold. If they are even a dollar over, they end up losing out on the free $3 mill bonus that comes their way. It may not sound like much money considering NBA salaries, but these days teams are willing to trade first round draft picks for $3 mill.

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