The Legend of the NBA Salary Cap

Mike Celizic wrote a nice piece for NBC Sports about the NBA salary cap. He raised some excellent points. I've always had conflicted feelings about the NBA salary structure. Before I start to talk shit I do want to say one thing. I love the NBA's draft system and rookie salary structure. This is the one area that the NBA laps the NFL and everybody else. The NBA Draft Lottery affords for a great deal of excitement because a shitty team can leapfrog an even shittier team. When most impact players in NBA drafts are found in the top 10 picks or so that's huge. The draft itself runs very quickly and doesn't feel nearly as drawn out as the NFL draft or as irrelevant as the NHL or MLB drafts. The way that they structure and slot their draft picks' salaries is brilliant. It makes it so easy to sign your young players and there is no acrimony between players, teams and agents. I'll give you two great examples. A couple years ago the Houston Texans took Mario Williams #1 in the NFL draft over the much more heralded Reggie Bush and Vince Young. The Texans gave all sorts of reasons but the #1 reason was that the agents for Bush and Young wanted quite a bit more money than Williams wanted. Considering your going to pay a guy like an all-pro when he's never played a snap, that's a big deal. If the #1 pick got a set amount they would've taken Bush. Now lets hop into our Delorean and go back another couple years. Some guy named LeBron James was coming into the NBA. With their salary structure system the negotiations between the #1 pick James and the Cleveland Cavaliers took less than a half hour. Imagine if the NBA was like the NFL and the #1 pick could ask for whatever he wanted. Would anybody beside the Knicks or the Lakers really have been able to afford LeBron? He could've asked for $200 million or something outrageous. And somebody (looking at you Isiah) would've paid it. See NBA people, I just said a whole bunch of nice things about y'all. You can stop reading now NBA people. Oh fuck it, haters keep reading.

The NBA salary cap is fucked. The main reason that I've always hated it is that there only seems to be 1 or 2 (3 at the most) teams with cap room any given summer. That means that top free agents have a very limited number of landing spots. Most of the time they'll re-up with their own team or try to force a sign-and-trade to a team that's over the cap. The teams with cap room are not elite teams. When they can't sign a top-level or even just plain good free agent, they panic. The fans start bitching, nobody's renewing their season tickets and it's a horrible situation. Then they sign players to incredibly overpriced contracts and those contracts hamstring them for 5 years. There's just never enough free agents and enough teams bidding for them. Just look at Rashard Lewis last year. He's a good player but right now he's 3rd best on his own team. He should've gotten about 5 years $50-$60 million. He got twice that. Do you really have cap room if you have nobody to spend it on?

Let's talk about the mid-level exception. Basically, any team over the salary cap gets 1 exception every year. Lately it's been for roughly $5 million per year. This is what allows Isiah Thomas to go out and sign somebody to a 5 year $25 million deal every season. Even though the Knicks payroll is roughly twice the limit of the "salary cap". When used correctly (see Spurs, San Antonio) it can help an elite veteran team add a bench player or two to make their run that year. But for the most part it just exists so that teams over the cap can sign SOMEBODY just so their fans don't revolt. If teams over the cap couldn't sign anything other than minimum salary players you would have teams that had the same personnel for several years no matter how bad they are. The fans would not like that. At least when they sign somebody for $5 mil they can point at him and tell the fans that he's the piece that's gonna put them over the top. The only recent exceptions to this rule that I can think of (exceptions meaning the guy was actually good) are Chauncey Billups to the Pistons, Hedo Turkoglu to the Magic and Stephen Jackson to Spurs. That's not a lot of success overall. The mid-level exception is just giving teams more rope to hang themselves with.

The luxury tax. How aptly named it is. In the NBA it's considered a luxury to have good team. In recent memory only the Pistons and the Spurs have had sustained success while remaining under the luxury tax threshold. These days you need three All-Star caliber players to win a title. All-Star caliber generally equals $10 million plus per year. So that's 3 guys for $30-$40 million. That's a lot of your cap room. In order to get 2 more quality starters and good bench depth you're going to have to dip into tax territory. So be it right. The thing with the tax is that if your over it you're basically acting like a porno whore and getting doubly penetrated. When you're over the tax line you write a check for every $1 that your over it. So if the line is $65 million and your payroll is $95 million you write a check for $30 million. All of this money is put into a pool and divided amongst all of the teams who are under the tax line. Imagine going over the tax line by a dollar. By being under the line you might be in line for a check for say $5 million. But you go over by $1 and instead you have to write a check for a dollar. That $1 actually cost you $5,000,001. Now imagine you're $1 million under the tax line. Somebody on your teams gets hurt and you sign a player for your mid-level exception of $5 million. So you just went from $1 million under the tax line to $4 million over it. Say you got $5 million for being under the tax line. Before you were in line to receive $5 million. You will now have to pay the $5 million for the contact, $4 million for being over the luxury tax and you will no longer receive the $5 million for being under the tax line. That player's actual cost to your team was $14 million dollars. Ain't that a bitch.

Click on the title for the link to Mike Celizic's article, it's a good read.