September 27, 2013 at 10:41 pm #499
I was reading an article about the $70M the luxury taxes that Brooklyn Nets would have to pay and I thought that figure is too low. Was I wrong when I have livrLyve the answer on the other site? I did some research into Larry Coon’s FAQ and here is how you calculate them:
The salary cap for 2013-2014 season is $58.679
Teams are required to spend 90%of the league cap. There is no penalty if teams don’t spend 90% of the designated cap, however, the difference must be distributed eventually to all the players on that team as bonus. For example 90% of $58/679 is $52.811. If the Suns only spend $50M this year, then the remaining 2.811 must be distributed eventually to all the Suns players.
The luxury tax line is $71.748
Teams only pay luxury taxes if they go over this line
Amount over tax threshold standard tax per excess dollar repeat offender
$5 or less $1.50 $2.50
$5m to $10m $1.75 $2.75
$10m to $15m $2.50 $3.50
$15m to $20m $3.25 $4.25
over $20m $3.25 plus $.50 per each $5m $4.25 plus $0.50 each $5m
Here is an excerpt of an article that article
“Looking ahead to the Brooklyn Nets’ projected payroll of about $98 million in 2013-2014, they will pay nearly $70M in taxes – compared to $26.25 million under the old tax system. That’s essentially an astronomical $170 million committed to team salary for the Nets and the Russian billionaire Mikhail Prokhorov, who wants desperately to win a championship.”
Projected payroll of $98M – Luxury tax line of $71.748 =$26.252M
Here is how by going just over $26.252M, the Nets will have to pay $69.071 in luxury taxes. If they go over the same amount the following year, then they are considered repeat offender. Their luxury tax would be $95.323M
First Timer Offender Repeat Offender
First $4,999,999 x $1.50=$7.5M First $4,999,999 x $2.50=$12.5M
Next $5,000,000 x $1.75=$8.75M Next $5,000,000 x $2.75=$13.75M
Next $5,000,000 x $2.50=$12. 5M Next $5,000,000 x $3.50=$17.5M
Next $5,000,000 x $3.25=$16.25M Next $5,000,000 x $4.25=$21.25M
Next $5,000,000 x $3.75=$18.75M Next $5,000,000 x $4.75=$23.75M
Last $1,252,000 x $4.25=$5.321M Last $1,252,000 x $5.25=$6.573M
Total $26.252 $69.071M $95.323M
At the end of the season, the league will collect all the luxury tax money from all the offenders, and up to 50% of the money collected will be distributed it eventually to all non-paying teams.
Any tax money not distributed to teams will be used for “league purposes.” in other words, at least 50% of the tax revenue will be used for league purposes each season.
“League purposes” essentially means for any purpose the league decides, including distributing money back to teams. The league decided that in 2011-2012, 100% of the tax revenue will be used as a funding source for the league’s revenue sharing program. Starting 2012-2013, 50% of the tax revenue will be used as a funding source for the revenue sharing program and the remaining 50% will be distributed to non-taxpaying teams in equal shares.
For owners interested in making as much money as possible aka cheap owners (ex. Phoenix Suns owner-robert Sarver), this means that they have plenty of incentive to stay under the tax line.
Most teams will go over the cap through the use of Bird’s Rights when they re-sign their own players. Bird’s Rights is the provision, named in honored of Larry Bird that give teams the right to exceed the salary cap in the process of signing back their own players.
If you’re below the salary cap (this season of $58.679M) and signing a free agent whom you do not have Bird Rights* on (in the Rockets case, it was Howard), you cannot exceed the salary cap to do so. So, if you have $16.5M in cap room and they want a contract starting at $20M (Howard), you’re (Morey has to clear up to sign Howard) going to need to clear up $3.5M more.
This was why Morey was so desperate to move TRob during the draft weekend. Teams knew this so they didn’t bite during that time. I think Morey was looking to get a first rounder for TRob (and again no one bite), but he was able to get 2 2nd rounders a couple of weeks later.
This was why Lin trade speculation came about (and yes I do believe he was going to trade Lin later but on his own term so he would have an upper hand). It was known that Howard wanted Asik to stay, so the only one left was Lin. Who else can Morey trade to give him about $3.5M in cap room? Even after trading TRob (reduced cap space of $2M), he needed about $1.5m to sign Howard and the rookie PG he just drafted.
*you have Bird Rights on a player if they’ve been on your team for at least 3 years, or you traded for them (Lakers got Howard’s Bird Rights when they traded for him from the Orlando Magic) and they haven’t signed a contract with a new team in the past 3+ years.October 2, 2013 at 9:11 am #724
Might be of interest: Houston Rockets Salary Cap Update: 2013 Training Camp Edition
And, Lin’s cap hit this year is $8.37m.November 7, 2013 at 1:33 am #1223
* If a team trades a player and they waive him, he can’t re-sign for a year.
* If a team acquires a player via trade, they can’t aggregate him in another trade for two months.
* A big extension and a trade have to be separated by at least six months.
* The player must have finished the preceding season with the team doing the sign-and-trade. No more doing a sign-and-trade with players who have been out of the league.
* A sign-and-trade can only be done during the offseason.
* A team cannot receive a player who is signed-and-traded if they finish the transaction above the apron, which is the point $4 million over the tax line ($71.748+$4m=$75.748m). So a team over the apron can’t do a sign-and-trade unless they dump enough salary in the transaction to get under. A team under the apron can’t add salary in a sign-and-trade that takes them over.
* A team can’t receive a signed-and-traded player if they’ve used the taxpayer mid-level exception.
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