Early in the negotiations of a new Collective Bargaining Agreement (CBA), at the urging of a group of owners, the NBA proposed an “upper spending limit” to replace the top of the luxury tax.
It was dead on arrival — the players know a hard cap when they see it and that’s an issue they were willing to strike over. (Adam Silver had to realize it was DOA as well, but he works at the pleasure of the owners, plus every negotiation like this includes a few pie-in-the-sky ideas expected to be shot down.)
The thing is, it wasn’t just the players who killed it, some of the smaller market owners did as well, ESPN’s Adrian Wojnarowski said on his podcast (hat tip Real GM).
“Even a lot of small market teams were worried about a hard cap in places, like let’s say Cleveland, where all of a sudden you’re good enough to win a championship. You have a team and you’re willing to go into the tax to keep that team together. Then all of a sudden with a hard cap and guaranteed contracts, the Cavs, using them as an example, or Oklahoma City four or five years from now, the smaller market teams worried ‘This is going to work against us.’
“If Cleveland can’t keep Darius Garland and Donovan Mitchell, Evan Mobley and Jarrett Allen. They have to pick one of them and one of those guys leaves and goes to a market, it defeats the purpose of why you wanted a hard cap to protect yourselves from Steve Ballmer spending or Joe Lacob spending and that didn’t happen. That was off the table fairly early.”
What drove the request by some owners was an effort to rein in the spending of new, richer owners who largely ignore the luxury tax.
For example, the Golden State Warriors (fueled by the cash cow that is the Chase Center) are set to spend just shy of $170 million in luxury tax alone this season — more than 20 NBA teams pay in total payroll for their roster. The Clippers — owned by former Microsoft executive Steve Ballmer, who is estimated to be worth more than $75 billion and is one of the 10 richest people on the planet — are poised to spend $140.3 million in luxury tax this season (on top of $193 million in payroll this season, meaning a total bill of $333.3 million). After extending Jordan Poole and Andrew Wiggins, the Warriors payroll + luxury tax bill for the 2023-24 season is already at $483 million, and that is without Draymond Green opting in or reaching a new deal with the team, or filling in other roster spots.
However, the point made by smaller markets — and by the Warriors, for that matter — is valid. Why should they be penalized for drafting well then wanting to keep their own players?
In the end, the league settled on a second tax apron — teams more than $17.5 million over the luxury tax will lose access to the mid-level exception, cannot bring in more money in a trade than they send out, and are limited in how far out they can trade draft picks. That doesn’t make for a hard cap, but it’s a strong disincentive to spend freely.
This season that second apron would have impacted six teams. It already hits two for next season (the Clippers and Warriors), although this is likely to be phased in and we don’t have the details on it yet.