The 2011 Collective Bargaining Agreement introduced a harsher luxury tax to constrain high-spending teams.
The 2017 CBA added a veteran-designated-player rule to further help teams retain their biggest stars, a particular benefit to the small-market teams that tend to lose those free agents to bigger markets.
Yet, privately, there are still small-market executives who will tell you that the NBA and players association didn’t go far enough in this agreement. Some smaller-market executives still believe they’ll struggle to keep stars, think the league should go as far as skewing salaries for players on teams in higher-tax-bracket states, eliminating the edge that places like Texas and Florida have with no state income tax.
This isn’t really a small-market, big-market dispute. The NBA’s two largest-market teams, Knicks and Lakers, play in states (New York and California) with high income-tax rates. The small-market Spurs play in a state (Texas) with no state income tax.
But it is an issue of fairness and competitive balance, and a tax-based spending adjustment is a reasonable idea in theory. After all, the CBA attempts to put the Raptors on equal footing with the difference between Canadian and American taxes.
However, going state by state could get complex in a hurry. How would jock taxes, paid by players in certain away markets, factor? What about other types of taxes (sales, property, etc.), which can be higher in states without an income tax to compensate? Does the league re-configure each team’s rules whenever the local tax code changes?
I’m not sure this is a big enough deal to warrant all the aggravation. But if teams executives in states with high income-tax rates are so upset, they can always lobby local politicians to change the tax law.