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NBA’s Push For ‘Upper Spending Limit’ In Recent CBA Could Jeopardize Labor Peace

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SAN FRANCISCO, CALIFORNIA – JUNE 02: NBA commissioner Adam Silver speaks to the media prior to Game … [+] One in all the 2022 NBA Finals between the Golden State Warriors and the Boston Celtics at Chase Center on June 02, 2022 in San Francisco, California. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and/or using this photograph, User is consenting to the terms and conditions of the Getty Images License Agreement. (Photo by Thearon W. Henderson/Getty Images)

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In some respects, business has never been higher for the NBA. The league hauled in a record $10 billion in revenue and $8.9 billion in basketball-related income last yr, based on NBA Commissioner Adam Silver, and franchise valuations are likewise skyrocketing.

Nonetheless, nine-figure luxury-tax bills from the Golden State Warriors, Los Angeles Clippers and Brooklyn Nets reportedly have some team ownership groups skittish. As such, the league is pushing for an “upper spending limit”—in other words, a tough salary cap—in its ongoing negotiations with the National Basketball Players Association over the following collective bargaining agreement, based on multiple reports.

When those reports first arose in late October, Sports Illustrated’s Howard Beck noted the hard-cap proposal was a time-honored tradition during CBA negotiations. The NBA typically floats the concept, the union staunchly rejects it, and the 2 sides move on to bargaining other thorny issues.

Nonetheless, it appears as if the NBA may not be bluffing this time, which could throw the league’s decade-long labor peace into serious jeopardy.

The NBA and the players union have until Dec. 15 to either opt out of the present CBA or negotiate an extension for that opt-out date. If either side does so, the CBA will expire after the 2022-23 season. If not, the present CBA will run through the 2023-24 season.

Longtime NBA insider Marc Stein wrote on Substack that the league’s “increasingly determined pursuit” of the upper spending limit “stays the No. 1 stumbling block in recent negotiations.” He added that “this doesn’t look like the standard trial-balloon push for a tough spending limit that the NBA has been known to drift in past negotiations after which suddenly drop to achieve concessions in other areas.”

That appears to be a non-starter for the NBPA. One source from the union’s side told Stein in October that “there shall be a lockout before there is a hard cap.”

Under the present CBA, the NBA has a soft cap. Things corresponding to Bird rights and the mid-level exception allow teams to exceed the salary cap to either sign free agents or re-sign their very own players. Once teams cross the luxury-tax threshold, they start having to shell out additional money in tax penalties depending how far they’re over the road.

The NBA’s proposal would “replace the luxurious tax with a tough limit that teams couldn’t exceed to pay salaries.” based on ESPN’s Adrian Wojnarowski. “The league “believes that the present system fails to supply a level enough playing field to make more of the 30 teams competitive and contends that the spending disparity of top teams has made the imbalance ultimately unsustainable” he added.

Under the present CBA, teams turn into hard-capped in the event that they sign a free agent using the non-taxpayer mid-level exception or bi-annual exception or acquire a player in a sign-and-trade. Those teams cannot cross the luxury-tax apron at any point for the rest of that league yr. Those are the one three mechanisms through which a team gets hard-capped in the present system, though.

The reporting to this point hasn’t shared many specifics of the NBA’s hard-cap proposal. It’s unclear whether the spending limit could be set at the present apron, which is almost $7 million above the luxury-tax line this season, or if it will be higher or lower.

Not all the team governors are on board with this proposal, Stein noted. Some are “fearful that an actual payroll line that absolutely cannot be crossed, versus the template in operation now that relies on the luxurious tax and repeater tax to do the job of a tough cap, could make it even harder to retain their best players.”

Teams will at all times shell out as much money as allowed for superstars, even when the league does implement its upper spending limit. Nonetheless, a tough cap could make it even tougher for teams to construct around two or three players on max contracts. Front offices would likely must re-evaluate their team-building strategy within the unlikely event that the league does get its way.

The 2 sides will likely explore alternative solutions that effectively accomplish the identical goals of a tough cap without actually implementing one. Raising the tax rate for teams above the luxury-tax threshold is the lowest-hanging fruit.

Under the present CBA, teams are taxed $1.50 per dollar they spend between $0 and $4,999,999 above the tax line, and the quantity increases incrementally from there. It jumps to $1.75 per dollar for the following $5 million, then $2.50, $3.25 and $3.75 per dollar as much as $15 million, $20 million and $25 million, respectively. From there, teams are charged $3.75 per dollar for the following $5 million, and an extra $.50 for every additional $5 million.

If teams are within the repeater tax—i.e., they have been in luxury-tax territory in no less than three of the previous 4 seasons—the tax rate is much more strict. It starts at $2.50 per dollar and rises the identical amount as the traditional tax from there. That is how teams just like the Warriors and Clippers now find themselves owing nine-figure tax bills.

If frugal teams find themselves concerned with the spending habits of their deep-pocketed counterparts, they may seek to further stiffen the tax penalties. Perhaps the present repeater rate (starting at $2.50 per dollar) could possibly be the non-repeater rate in the brand new CBA, and the brand new repeater rate could start at $3.50 per dollar. The tax rate could also increase by $.75 per $5 million quite than the way in which it’s structured now.

By enacting those two changes, repeater-tax teams would owe a whopping $63.8 million in tax penalties alone in the event that they were $15 million above the tax line. It might turn into prohibitively expensive to go much higher than that, even for the league’s wealthiest governors. While it would not technically be a tough cap, it will effectively accomplish the identical goal.

The league’s push for a tough cap could still wind up being much ado about nothing. But when either side does opt out of the CBA inside the following week, labor peace may not be guaranteed beyond the 2022-23 season for this reason proposal.

Unless otherwise noted, all stats via NBA.com, PBPStats, Cleansing the Glass or Basketball Reference. All salary information via Spotrac or RealGM. All odds via FanDuel Sportsbook.

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