The NBA’s big spenders will soon have to reckon with a much more punitive luxury tax structure. From the league’s implementation of the tax in 2003, teams have been required to pay “just” one dollar in luxury tax for every dollar in payroll that exceeds the tax threshold. This relatively soft penalty on an already soft salary cap will soon undergo significant changes. Cap guru Larry Coon describes the new luxury tax conditions under the 2011 Collective Bargaining Agreement, which will kick into effect next year:
Starting in 2012-13, teams pay an incremental tax that increases with every $5 million above the tax threshold ($1.50, $1.75, $2.50, $3.25, etc.). Teams that are repeat offenders (paying tax at least four out of the past five seasons) have a tax that is higher still — $1 more at each increment ($2.50, $2.75, $3.50, $4.25, etc.).
The desired effect is that these heavier penalties will give pause to even the deepest pocketed, biggest spending owners such as the Knicks’ James Dolan, the Lakers’ Jerry Buss, and the Mavericks’ Mark Cuban, when it comes to dishing out big bucks on salaries. (Though many might point to this summer’s free agency period as evidence the dissuasive effect has been minimal so far).
With the Kroenke family at the helm, the Denver Nuggets have been in the upper strata of teams with wealthy owners. According to (more…)