Table of Contents
What is the luxury tax/luxury tax?
Luxury tax refers to the additional tax that the team needs to pay if the team's salary exceeds the total amount specified for the season. The luxury tax will be equally divided among other teams that do not need to pay the tax.
For example, there are 7 teams that need to pay luxury tax in the 2021-22 season, including the Warriors, Nets, Clippers, Bucks, Lakers, Jazz and 76ers. Among them, the Warriors need to pay US$170 million. The tax amount alone is nearly double that of the Thunder, which has the league's lowest team salary of $80.93 million.
The NBA champions in the past 20 years include the 2020 Lakers, 2017 Warriors, 2015 Warriors, 2014 Spurs, 2008 Celtics, 2007 Spurs, 2006 Heat, 2004 Pistons and In 2003, everyone except the Pistons exceeded the salary cap, which means that 11 championship teams paid the luxury tax and 9 did not. Among them, the Spurs were the team best at competing for the championship.
Why is a luxury tax/luxury tax needed?
To put it simply, the purpose of having a salary cap and setting up a luxury tax is to prevent a few wealthy teams from monopolizing first-class stars and making it impossible for small market teams to compete with them. In other words, if you want to spend money to recruit star players to compete for the championship, you must pay extra taxes to get the privileges.
Who does the NBA luxury tax go to?
The luxury tax will be divided equally among the teams that do not need to pay the tax, which is to compensate small market teams.
How is luxury tax/luxury tax calculated?
Starting from July 1st every year, the NBA will have a player trade protection period (Moratorium Period) of at least one week. During this period, teams cannot sign or trade with free agents; on the first day after the protection period ends, the NBA will announce the salary for the new game. The upper and lower limits and the luxury/luxury tax, and the free agency and trade market for the new season will unfold.
The tax line set by the NBA is adjusted every year, and the luxury tax is generally increased approximately every quarter to adjust for inflation.
poor taxand salary floor
In addition to the salary cap, the NBA also has a lower limit on the team's total salary in order to maintain competitive quality. If the team's total salary does not reach the lower limit, it will also be fined, which is the so-called poor man's tax. The NBA will refund the tax to the team. players.
Exceptions to Luxury Tax/Luxury Tax
Bird rights, also known as Larry Birdexception, is a special clause in contracts signed between NBA teams and players that ignores the team's salary cap, and is therefore an exception to the luxury tax/luxury tax.
Further reading:Quickly explain the NBA's Bird Right. The four key points of the Bird Clause are analyzed at once.
