Taxing times in the NBA: the luxury of stars, the bottom line and lessons for FFP
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By Steven Slayford 2 July 2013 The NBA's salary cap is well known but the league’s luxury tax is a less familiar beast - and one with potentially significant repercussions for many teams next season. The NBA salary cap states that each team is only allowed to spend a league-set amount on wages, that number was $58.044 million for the 2012-13 season. The association runs what is known as a “soft cap”, meaning teams are able to exceed the cap under multiple exceptions. Some exceptions are fairly straightforward: rookie contracts for first-round draft picks, signing replacements for current players who incur season-ending injuries and an unlimited number of players on the league’s minimum allowed contract. Other exceptions are slightly more complicated: the Larry Bird exception (named after the Boston Celtics hall-of-famer), in which a team can re-sign their own player to a maximum contract as long as the player has played for that team for three seasons. Other teams are forbidden from matching or exceeding this offer. The Early Bird exception, similar to the Bird exception except the player only has to have been playing for the team for two seasons and can only sign a new contract between two and four seasons long. The mid-level exception, which teams can use once a year to sign one or more free agents for a maximum amount total contract. This is $5m over four years for a team who will be over the cap line but did not pay luxury tax in the previous season and $3m over three years for a team over the cap line and who did pay luxury tax in the previous season. Since 2011, teams who would remain under the cap can now use this exception to sign a player on a $2.5m contract for two years. The bi-annual exception is similar to the mid-level exception, except it can only be used once every two years on one or more contracts that pay a total of $1.672m over two years to one or more players. Since 2011, only teams who are not did not pay luxury tax can use this. So far, so simple.
Taxing times in the NBA: the luxury of stars, the bottom line and lessons for FFP
Taxing times in the NBA: the luxury of stars…
Taxing times in the NBA: the luxury of stars, the bottom line and lessons for FFP
By Steven Slayford 2 July 2013 The NBA's salary cap is well known but the league’s luxury tax is a less familiar beast - and one with potentially significant repercussions for many teams next season. The NBA salary cap states that each team is only allowed to spend a league-set amount on wages, that number was $58.044 million for the 2012-13 season. The association runs what is known as a “soft cap”, meaning teams are able to exceed the cap under multiple exceptions. Some exceptions are fairly straightforward: rookie contracts for first-round draft picks, signing replacements for current players who incur season-ending injuries and an unlimited number of players on the league’s minimum allowed contract. Other exceptions are slightly more complicated: the Larry Bird exception (named after the Boston Celtics hall-of-famer), in which a team can re-sign their own player to a maximum contract as long as the player has played for that team for three seasons. Other teams are forbidden from matching or exceeding this offer. The Early Bird exception, similar to the Bird exception except the player only has to have been playing for the team for two seasons and can only sign a new contract between two and four seasons long. The mid-level exception, which teams can use once a year to sign one or more free agents for a maximum amount total contract. This is $5m over four years for a team who will be over the cap line but did not pay luxury tax in the previous season and $3m over three years for a team over the cap line and who did pay luxury tax in the previous season. Since 2011, teams who would remain under the cap can now use this exception to sign a player on a $2.5m contract for two years. The bi-annual exception is similar to the mid-level exception, except it can only be used once every two years on one or more contracts that pay a total of $1.672m over two years to one or more players. Since 2011, only teams who are not did not pay luxury tax can use this. So far, so simple.