The salary cap for the 2013-14 NBA season was set at $58.679 million and the luxury tax at $71.748 million. In an attempt to dissuade big market teams being able to spend whatever they wanted when building their respective teams, the NBA introduced a new luxury tax penalty system in the new CBA (See Larry Coon’s CBA FAQ page for details).
The penalty for teams over the luxury tax line goes as follows:
- Portion of team salary $0-$4.99 million over tax level: $1.50 for $1
- Portion of team salary $5 million-$9.99 million over tax level: $1.75 for $1
- Portion of team salary $10 million-$14.99 million over tax level: $2.50 for $1
- Portion of team salary $15 million-$19.99 million over tax level: $3.25 for $1
- Rates increase by $0.50 for each additional $5 million of team salary above the tax level.
This has worked quite effectively; fewer teams venture into the tax than ever as tax rates have become heavier, and at the trade deadline we saw multiple cost cutting moves from contenders trying to move under the tax line. The Clippers dumped Antawn Jamison to the Hawks and Byron Mullens to the Sixers, Chicago dumped Erik Murphy to the Jazz.
Memphis was artfully able to cut costs right at the tax when Zach Randolph didn’t make the All-Star team this season (the CBA offers incentives to players and mark them as likely or unlikely to be fulfilled. Since Z-Bo made the All-Star team in 2012-13, his All-Star incentive was marked as likely, but since he didn’t make the team this year the Grizzlies fell right below the tax line. This also required them to use the stretch provision on Fab Melo‘s contract, extending his $1,311,240 to three years at $437,080. Good job Memphis!).
However there is at least one owner who doesn’t seem to care at all about how punitive the luxury tax is; Brooklyn Nets owner Mikhail Prokhorov. The Nets spent $190 million on their roster this season, including tax payments, and are poised to lose $144 million in their basketball business according to a league memo obtained by Grantland’s Zach Lowe.
Being able to spend so much money without a care in the world has sparked the jealousy and anger of other NBA teams, but since the luxury tax Brooklyn pays is distributed among non-tax paying teams and the Nets future outlook looks shaky at best right now, that perception has changed.
In simplistic terms building a good NBA team is a function of two things; how much money you spend and how efficiently it is spent on players. The better you are able to do both, the better team you have.
Of course there’s a sort of long-term incentive structure built into that equation too, which is the pay off of how you are spending your cap now versus planning for the future.
Here are the graphs of how much money each team spent per victory in the NBA last season (click on images to enlarge, amount in millions of dollars spent on each regular season victory):
Power Rankings (Best to Worst, Millions of Dollars per Win)
- San Antonio Spurs 1.02
- Phoenix Suns 1.12
- Portland Trail Blazers 1.16
- Houston Rockets 1.18
- Indiana Pacers 1.19
- Oklahoma City Thunder 1.20
- Los Angeles Clippers 1.28
- Dallas Mavericks 1.37
- Golden State Warriors 1.40
- Toronto Raptors 1.43
- Memphis Grizzlies 1.43
- Charlotte Bobcats 1.46
- Chicago Bulls 1.48
- Atlanta Hawks 1.53
- Washington Wizards 1.60
- Minnesota Timberwolves 1.70
- Miami Heat 1.76
- Denver Nuggets 1.82
- New Orleans Pelicans 1.95
- Cleveland Cavaliers 2.00
- Detroit Pistons 2.13
- Sacramento Kings 2.25
- Utah Jazz 2.30
- Orlando Magic 2.33
- Philadelphia 76′ers 2.83
- Boston Celtics 2.84
- Los Angeles Lakers
- New York Knicks 3.27
- Milwaukee Bucks 3.62
- Brooklyn Nets 4.39
*Salary Cap details courtesy of ShamSports.com