NBA teams put in stiff luxury tax penalties… which luxury-tax payers will still benefit from

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Wait, what?

From Ken Berger of CBSSports.com:

The luxury-tax “cliff” experienced by tax teams, by which they felt the full brunt of going slightly over the tax level by losing all the tax money they would’ve received had they stayed under, also was addressed in the owners’ proposal. The league offered that such teams would receive half the tax money squandered by going from being a tax receiver to a tax payer.

via Talks blow up with ultimatum, Wednesday deadline – CBSSports.com.

So just so we’re clear on this. You’re the small-market owners. And you’re threatening to detonate professional basketball in the United States if you don’t get more financial help. And you’re creating an acrimonious atmosphere with the players that essentially amounts to legalized extortion. And giving them ultimatums and threats. And yet the system you’ve supported which creates stiffer penalties for going into the luxury-tax… is still going to give them half the collective money back?

To clear this up, if the Knicks send an exorbitant amount of money, they pay the tax amount into a pool that is redistributed to the teams, with the tax-paying teams essentially getting a rebate.

I’m not going to crunch the numbers because I suck at it, but basically, the Knicks will still earn money from the luxury tax pool, despite being tax payers. The fact that the tax they will likely spend will far exceed the amount they get back isn’t the point. It’s that giveback that makes it easier to swallow. If you’re a small-market owner, couldn’t you find the financial gap between where the union and league are, almost entirely in the amount you’re going to be surrendering to the luxury-tax-paying teams, who again, chose to spend that much?

It’s maddening. But then, it’s teams looking out for themselves. They want to keep their options open, so that if they draft a Tim Duncan, they can spend around him to compete and keep him, while also easing the burden on themselves. As always, as we’ve seen in these negotiations, the league wants the players to make up the whole difference, while giving themselves all the breaks they can handle, thereby extending the flawed system.

Funny way of doing business.