Dec. 14, 2003, 1:26AM NOTEBOOK Luxury tax could be gone after 2004-05 By JONATHAN FEIGEN Copyright 2003 Houston Chronicle The NBA extended its collective bargaining agreement with the Players Association as a matter of course. This was assumed since the day the deal was done in January 1999. No one noticed. The league and union leaders even said they were encouraged to be talking about the next contract long before they will need it. Whatever. The real victory came when union chief Billy Hunter tried to complain. "I'm still not a fan of the luxury tax," he said, as if he could not think of anything else. And nothing could have been a greater sign that there might be labor peace leading into the next deal. The NBA has quietly let teams know there probably will not be a luxury tax after the 2004-05 season, the last season of the deal. The tax is triggered by a formula that considers basketball-related income and players' salaries. Income is expected to reach the point that there will be no tax. Union leaders love a good fight, or they would not be good union leaders. But Hunter will have a hard time rallying the troops to fight a tax that does not exist. Next summer, teams are expected to be willing to spend without the fear of a tax hit after the following season. A few big contracts and the usual amount of player movement, and Hunter will have a hard time convincing players to start over. Calls to the Players Association were not returned. The NBA, meanwhile, thinks it has a pretty good thing going. And if the timing was not good enough, the league and its players can watch the NHL stab itself all summer and learn from that lesson in time for their next negotiation. Then there really might be labor peace. Forget that. Leagues never learn from mistakes in fighting labor battles. But the luxury tax thing is a good sign. "We have told the teams there is a substantial question about whether there will be a luxury tax after that season," NBA deputy commissioner Russ Granik said. "It's difficult to predict because of the way system works. Some years we will have the tax, some years not. The tax is only kicked in if after everything else shows we are paying out too much revenue, too large a percentage to the players. If the deal is working, and it stays at the appropriate percentage, we won't." The league has no real control over whether there will be a tax that year. But it can let the teams know they can relax a bit and then truthfully argue "the deal is working." So it looks like nothing's being changed, but the league doesn't foresee a luxury tax in the near future. I like that there are limits on player salaries. I'm on the fence with regard to the luxury tax itself.
I always wondered, why don't they have a solid cap that can't be compromised. If a team exceeds the cap then they can't let their team play until its under the cap. Is there that much greed in the league that a 50 million/year cap too much to handle? 12 players at 50 mil would be about 4.1 mil per player a year. Obviously the franchise players would still get their 10+ mil a year and a lot of bench guys would get sub 1 mil contracts, but with a 30 team league that would still be 1.5 Billion dollars a year paid to guys playing ball. Its sickening, the teams that have a half decent GM could field a consistent 2nd round playoff team year in and year out simply because their owner can shell out 70+mill a year. Its kind of sad when all the emotions and money we put into a team all comes down to the owner having the cash to shell out a winner.
Then the NBA would be like the NFL, where you have star players mixed with horrible players (think Lakers of last year). I don't see anything wrong with going over the cap to re-sign your own guys. The odds of a star player staying with his original team would be diminished even further.
I also don't think that it really benefitted anyone, the owners or the players to have it. Owners have to let players walk to avoid it, while the players obviously have to settle for smaller contracts. I think at this point, most NBA owners but Cuban have some economic sense to where the luxury tax wouldn't really be needed to keep owners in line.
50 mill is a lot of money. You could have plenty of quality players with that kind of jack. Think about it. 2 star player getting 10 mil a year, then 4-5 players getting about half that. You could easily get 5 more players around 2 mil a year each...unless you pay guys like moochie norris 4-5 mill a year.
The difference between the NFL and the NBA is you can cut the majority of your scrub players in the NFL without fear of paying off their contracts for years to come (i.e. Moochie Maloney Or in Toronto's case Hakeems! ) It'd be so nice to be able to cut your ****ty players without worrying about paying off their long term contract. If they're really a good player they'll earn their keep and stay on the team. In some ways I wish the NBA was like the NFL in that aspect. Then again I probably have the salary cap issue of cutting players in the NFL all wrong since I don't really keep track of it often.
That's the problem... What you are saying holds weight, but just about every team in the NBA has a Moochie Norris or worse (read: Gugliotta) type contract. To where a big chunk of that 50 million is towards dead space. Also, what is your view on re-signing players?
A salary cap has nothing do with guaranteed contracts. The only way a salary cap would work in the NBA, is if there were no more guaranteed contracts. Let's say a cap were implemented today. What could a team like the Suns do, when they have 4 max contracts under the books? Just by that alone, they would be near or over a hypotehtical cap. It's not easy to enforce a cap in the NBA, unless they say that they will have one today, set for 2010 or later, when no current contract goes past that date. It would be quite unfair to impose rules for a hard cap that is not 7+ years in advance.
It's a good system - it's forcing owners to control themselves. Just before it got brought in, players like Keith Van Horn were turning 3 years of "potential" into 7-yr max contracts like candy. I promise you, Mike Bibby, Odom, KMart, Olowakandi, and tons of other B/B+ players would be grabbing max contracts w/o a problem. The NBA can't afford that, and the luxury tax forces owners to negotiate fair deals. On the flipside, it's not a hard cap and allows teams that are on the brink of a championship to still spend enough to contend. But you can't afford to stay there. That's why the Blazers and Kings are trimming the fat now that their window is closing. The Mavs will follow in a few years, I'm sure. Even the Knicks are trying to get themselves under control. Evan
You do know the signing bonuses for the players are equivalent to almost a year's salary for most players right? Not to mention the contract would definitely be higher for most star players and there will be no loyalty for a player to his team. We'll see extremely short contracts and players bolting for the highest offer every three years. Look at the NFL, there is soooo much parity and players moving around in teams. Defending superbowl champs are lottery bound next season. I hate that kind of leagues personally.
In otherwords, the Les can afford to go "Cuban" next summer, and take on some salaries. And use the trade exception, etc.
Update on the luxury tax speculation. Sunday, December 21, 2003 By Marc Stein ESPN.com Editor's note: As part of "The Stein Line" every week, ESPN.com senior NBA writer Marc Stein takes you around the league for the latest news and notes in "Coast to Coast." Dan Rosenbaum, a UNC-Greensboro economics professor who ranks as one of the NBA's foremost luxury-tax authorities, projects a less than one-in-10 chance of a luxury tax being triggered after the 2004-05 season. Commissioner David Stern tells ESPN.com that he's not even sure a tax will be triggered after this season. "I assume there will be a tax," Stern said, "but I don't know. It's probably more than likely, but it's far from a certainty. I'm working my tail off to see if I can make it go away (this summer) by virtue of increased revenues." More than one source close to the talks between the league and the players union, meanwhile, insists that there won't even be a luxury-tax mechanism in the next collective bargaining agreement, which would take hold in the 2005-06 season. What does it all mean? For now it means that the likelihood of an NBA work stoppage this decade is dwindling by the day. "I think both sides are fully aware of the damage that would be caused by another work stoppage," said Toronto Raptors swingman Michael Curry, president of the Players Association. "I feel pretty safe in saying that there will not be a work stoppage." The luxury tax, of course, is triggered when player salaries exceed a designated percentage of the league's cumulative basketball-related income. The percentage rises from 55 percent this season to 57 percent next season. And as you've surely heard ad nauseum by now, teams pay one dollar for every dollar they sit over the luxury-tax threshold, and also stand to lose up to $8 to $10 million in rebates from luxury- and escrow-tax money in a tax season. But whenever revenues rise faster than player salaries, as we're seeing, it reduces the likelihood that the tax will kick in. So ... 1. If the tax is not triggered after this season or next season, that would almost certainly convince teams to start signing and trading more liberally than they have recently. Which would put the players in a much more conciliatory mood at the bargaining table. In that case, the collective bargaining agreement might only be tweaked slightly from the present model. 2. If the tax is triggered after this season or next -- but then destined to be unanimously deleted as part of the new deal -- the players would likely be willing to reduce the length of guaranteed contracts, which is a major desire for the league's owners. In exchange for a world devoid of luxury-tax constraints and escrow payments back to the owners, players around the league sound increasingly willing to drop the length of a maximum contract from six or seven years to three or four. Especially when you figure that many players in the One Player, One Vote union never receive long-term contracts. "It depends on what they offer," Curry said. "Of course you want to keep contracts as long as you can. But, to date, changing the tax laws is the players' biggest concern." Either of the aforementioned "if" scenarios bodes well for the sides hammering out a new agreement, even if a new (but less punitive) mechanism is introduced to replace the luxury tax. The notion of a player walkout is highly unlikely unless we see more seasons like 2002-03, after which the luxury tax was triggered for the first time, costing teams millions -- and after which the players, according to figures provided by salary-cap expert Larry Coon, paid some $170 million back to the owners in escrow funds. ******** I'd really like to see max contracts be shortened to three or four years. That's much more reasonable. And it would minimize the predicaments that most teams are in now because of huge long contracts. The luxury tax has already pushed the trend this direction.
