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 Last part about a More Ideal NBA CBA, How about no salary cap and just a luxury tax?

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Should the NBA just get rid of the salary cap and implement just a luxury tax?
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PostSubject: Last part about a More Ideal NBA CBA, How about no salary cap and just a luxury tax?   Fri Mar 18, 2011 4:10 pm

I've been clamoring for a hard cap, and cutting players' salaries to the point where some guys are losing over a third of the contracts' original value.

The NBA right now is at a crossroads in terms of where it wants to go. It could go more like the NHL, which is what the league (at least publicly) wants to do and what the poorer performing teams' owners (like Ted) and smaller market teams want. However, it could also go more toward the MLB, which is how many of the richest and perennially the best teams want to do and also what the highest paid players want to do (T Mac believes the Lakers and Knicks like the system the way it is and perhaps would like no cap).

MLB salary system
Major League Baseball is the only major sports league where there is absolutely no cap on how high or low a team's payroll can be, and there is no cap on how high a player's salary can be. Also like the NFL, there is no maximum salary a rookie from the MLB draft (who usually starts in the minor leagues) can be paid, though there are conceptual guidelines on how much to sign a draft pick. Obviously Bryce Harper, catcher/outfielder for the Washington Nationals was the #1 pick last year will not be signed to a $300 million/10 year deal but he also would likely be signed for considerably more than the MLB minimum salary of $390,000.00/yr. He got a five year deal for $9.9 million last August. The 2009 #1 draft pick, Steven Strasburg, the pitching phenom also for the Nationals, got a four year deal for $15 million.

With no set limits aside from a minimum salary, payrolls in the MLB are very wideranging, with the Pittsburgh Pirates dishing out the least amount for a total $34,943,000.00 in the 2010 season while the New York Yankees last year dished out $206,333,389.00 to their players, which is 590% or 5.9 times as much money as Pittsburgh. Here is a list of the six biggest team sports leagues and how much the lowest payroll team paid, the highest payroll team paid, and the difference between the two.

League Season Lowest Payroll Team Amount Highest Payroll Team Amount Percentage Diff.
MLB 2010 Pittsburgh Pirates $34,943,000.00 New York Yankees $206,333,389.00 590%
NFL 2009-10 Kansas City Chiefs $81,829,650.00 New York Giants $138,354,866.00 69%
NBA 2010-11 Sacramento Kings $44,030,596.00 Los Angeles Lakers $91,569,659.00 208%
NHL* 2010-11 Florida Panthers $43,400,000.00 Washington Capitals $63,855,000.00 47%
MLS** 2010 Chivas USA (LA) $2,107,567.00 Los Angeles Galaxy $11,100,763.00 527%
WNBA*** 2010 Minimum Cap $796,000.00 Maximum Cap $827,000.00 4%

*In the NHL, a team must pay at least $43.4 million in salary. The Panthers' numbers are right now under the minimum cap, but it will be rectified at the end of the season. The Capitals' numbers according to most sites are currently above the salary cap plus the 7.5% bonus cushion, but some bonuses are not likely to be paid, and the team can never give out more than the figure listed.

**In the MLS, the salary cap is soft, but they allow something called the designated player rule, where teams are allowed to sign to two players past the maximum salary, and $335,000 of their salaries will count toward the cap. The salaries for the LA Galaxy is the total payroll, not the cap total and they have two designated players on the team, those being David Beckham and Landon Donovan.

***The WNBA does not release individual team payrolls. However every team must spend at least the minimum and no more than the maximum values presented.

Well, let's take out the WNBA and the MLS because WNBA competitiveness is largely based on the players' altruistic concerns for furthering their league since most players make their real money elsewhere and the MLS designated rules allow for major international stars to play in the US league which can cause salary disparities.

Not surprisingly, the NHL and NFL have the least amounts of salary disparity because of the hard caps in place. In the NBA, the Lakers are paying a bit over twice as much money for their players than the Kings who have the lowest payroll, with a soft cap. I certainly believe that the Lakers wouldn't mind spending even more if it were possible.

MLB Luxury Tax
The MLB luxury tax requires that teams which spend over a certain amount in salaries. In 2011, the tax threshold is $178 million. The tax amount is as follows:

  • The first year a team is above the tax line, it must pay 22.5 cents for each dollar above the tax level.
  • the second year a team is above the tax line, it must pay 30 cents for each dollar above the tax level, whether it's a consecutive year or not.
  • the third year (and any subsequent years) a team is above the tax line, it must pay 40 cents for
    each dollar above the tax level, whether it's a consecutive year or not.

Luxury tax money is NOT paid to the teams which didn't go over the tax line. It is paid back to the league which distributes it toward player benefits (retirement, health care) and also for baseball promotion programs for children, primarily abroad in places where the sport isn't particularly popular. All time, only the New York Yankees have paid the tax every year it's been in affect. The Boston Red Sox have paid the tax four times. The LA Angels and the Detroit Tigers paid this tax once.

For baseball, this system is flawed toward the other teams which are not big spenders because they don't receive any proportion of the luxury tax money. Second, the tax threshhold is so high to the point where it's essentially the "Yankees (and Red Sox) charity fund". Therefore, the luxury tax is practically useless.

1. Players salaries, in particularly those of the best players are dictated by the market. LeBron James could theoretically get paid $50 million a season by the Lakers if there was a bidding war for his talents. This is even moreso with Kobe, who could get paid $100 million a year by the Lakers, because he is worth that much to his team.
2. Teams with adequate financial resources will continue to have ever growing fanbases worldwide, the teams get better and more lucrative sponsorships, and therefore they will continue to be able to sign even more players.
3. Prestigious teams with the most star players will develop fan bases that are worldwide. The team becomes a national icon, rather than just the pride of the city. In the NBA, the Lakers are the pride of the League. The Spurs are just the pride of the Alamo. In the NFL, the Dallas Cowboys are America's team. The Atlanta Falcons are just the pride of the city.

1. Only teams that have adequate financial resources will be able to snag top free agents, and therefore only some teams will be able to "buy championships" which would be the teams with the richest ownership groups.
2. It is possible that ticket prices can continue to rise out of control even in the home arenas of the most prestigious teams to where the fans cannot afford to see games. The Yankees are the best example. Therefore, many of their fans travel to division rivals that don't have great teams, most notably Baltimore which is about a three hour drive away. However, prestigious teams' fans tend to show up in droves in other stadiums because the other team is not a good team and those fans live in the other city.
3. Teams that are perennial losers will get the best draft picks and those picks may become great players even on those teams. However perennial losers tend to have less money than perennial winners, and those players will just go to the best teams, thus making perennial losers a "farm system" for the perennial winners. Baseball is infamous for being this way.

If the NBA were going to get rid of the salary cap and implement only a tax what would be the best way to do it to make the league as equal as possible?

1. A tax threshhold should not be particularly high so considerable teams would be forced to pay the tax should they decide to pay that much moeny.

2. In order to prevent a situation like the Pittsburgh Pirates, perhaps a tax should be levied on teams whose salaries are too low.

3. At least some portion of luxury tax money must be sent back to teams with lower payrolls. There also must be some mandate to the teams that this form of revenue sharing must be used solely for salaries. While this is likely gonna just raise salaries all around in the short term, at some point the rich teams can't keep raising salaries and paying more and more luxury tax. At this point, at least in theory, some equilibrium has been reached.

4. Bird rights must still be kept to give incentives for free agents to remain with the old teams.

Even with these in place, it would likely force a number of teams to fold because they can't afford to pay higher salaries, like the Kings, Wolves, Grizzlies, and Pacers. This will force players to lose jobs, and the players union won't like that, even though LeBron wouln't mind these teams, plus the Bobcats, Cavs, Clippers, and Wizards folding as well.
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