A little refresher of the new luxury tax system:
The Lakers again as a case study, this time from HoopsWorld.com:
The years counting towards the repeater tax (additional tax on tax paying teams four out of five seasons) started in 2011-2012. As mentioned in HW.com article, it is not an issue until 2014/15.
Luxury tax
• 2005 CBA: Teams paid $1 for every $1 their salary was above the luxury-tax threshold.
• 2011 CBA: Teams pay $1 for every $1 their salary is above the luxury-tax threshold in 2011-12 and 2012-13. Starting in 2012-13, teams pay an incremental tax that increases with every $5 million above the tax threshold ($1.50, $1.75, $2.50, $3.25, etc.). Teams that are repeat offenders (paying tax at least four out of the past five seasons) have a tax that is higher still -- $1 more at each increment ($2.50, $2.75, $3.50, $4.25, etc.).
• Who benefits? I'll tell you which teams don't benefit -- the perennial taxpayers, like the Lakers and Mavericks. When the league was unable to negotiate a hard cap, they settled for the next best thing -- a more punitive luxury tax that will make teams think twice before committing to a higher payroll. For example, the Lakers' tax bill in 2011 (when the tax was dollar-for-dollar) was about $19.9 million. Under the new system, being that far over the tax line would cost them $44.68 million. If they were a repeat offender (paying tax at least four of the previous five years) they would owe $64.58 million!
http://espn.go.com/nba/story/_/page/...pares-last-one
• 2005 CBA: Teams paid $1 for every $1 their salary was above the luxury-tax threshold.
• 2011 CBA: Teams pay $1 for every $1 their salary is above the luxury-tax threshold in 2011-12 and 2012-13. Starting in 2012-13, teams pay an incremental tax that increases with every $5 million above the tax threshold ($1.50, $1.75, $2.50, $3.25, etc.). Teams that are repeat offenders (paying tax at least four out of the past five seasons) have a tax that is higher still -- $1 more at each increment ($2.50, $2.75, $3.50, $4.25, etc.).
• Who benefits? I'll tell you which teams don't benefit -- the perennial taxpayers, like the Lakers and Mavericks. When the league was unable to negotiate a hard cap, they settled for the next best thing -- a more punitive luxury tax that will make teams think twice before committing to a higher payroll. For example, the Lakers' tax bill in 2011 (when the tax was dollar-for-dollar) was about $19.9 million. Under the new system, being that far over the tax line would cost them $44.68 million. If they were a repeat offender (paying tax at least four of the previous five years) they would owe $64.58 million!
http://espn.go.com/nba/story/_/page/...pares-last-one
The Lakers again as a case study, this time from HoopsWorld.com:
Economics suggest the Lakers will look to move Gasol sooner than later.
Repeater Tax
The new Collective Bargaining Agreement (CBA) put into place before this season did not change the dollar-for-dollar luxury tax rate immediately. It remains the same for the year to come.
It’s during the 2013/14 NBA season that the finances get very messy and then, the following year, they go completely off the rails.
In approximate numbers, the Lakers paid $86 million in payroll this past season with $16 million in luxury taxes, for a total of $102 million.
For the sake of argument, bump that number up to about $92 million for the coming year, accounting for raises and the team’s Mini-MLE ($3.1 million). With tax, that’s roughly $114 million. A lot, but a number the Lakers have paid in the past for what they believed was a championship contender.
It’s the following year where the math starts to break down.
If the team is still on the Kobe Bryant/Andrew Bynum/Gasol core by 2013/14 and the threshold remains at $70 million (which may climb and subsequently lower taxes, but then the Lakers can’t know today where that line will be tomorrow), the graduated tax rate would push a $92 million payroll to $144.5 million (with $52.5 million in tax).
That’s BEFORE the repeater tax kicks in.
If the Lakers were somehow to remain at $92 million for 2014/15, with the repeater tax finally a factor, the tax climbs to $74.5 million.
There’s no way the Lakers are going to pay $166.5 million for a roster. Don’t forget the league is taking about $50 million from the Buss’ coffers on top of that via revenue sharing.
http://www.hoopsworld.com/nba-pm-lak...eal-tax-issues
Repeater Tax
The new Collective Bargaining Agreement (CBA) put into place before this season did not change the dollar-for-dollar luxury tax rate immediately. It remains the same for the year to come.
It’s during the 2013/14 NBA season that the finances get very messy and then, the following year, they go completely off the rails.
In approximate numbers, the Lakers paid $86 million in payroll this past season with $16 million in luxury taxes, for a total of $102 million.
For the sake of argument, bump that number up to about $92 million for the coming year, accounting for raises and the team’s Mini-MLE ($3.1 million). With tax, that’s roughly $114 million. A lot, but a number the Lakers have paid in the past for what they believed was a championship contender.
It’s the following year where the math starts to break down.
If the team is still on the Kobe Bryant/Andrew Bynum/Gasol core by 2013/14 and the threshold remains at $70 million (which may climb and subsequently lower taxes, but then the Lakers can’t know today where that line will be tomorrow), the graduated tax rate would push a $92 million payroll to $144.5 million (with $52.5 million in tax).
That’s BEFORE the repeater tax kicks in.
If the Lakers were somehow to remain at $92 million for 2014/15, with the repeater tax finally a factor, the tax climbs to $74.5 million.
There’s no way the Lakers are going to pay $166.5 million for a roster. Don’t forget the league is taking about $50 million from the Buss’ coffers on top of that via revenue sharing.
http://www.hoopsworld.com/nba-pm-lak...eal-tax-issues
The years counting towards the repeater tax (additional tax on tax paying teams four out of five seasons) started in 2011-2012. As mentioned in HW.com article, it is not an issue until 2014/15.
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