Luxury Tax Loop hole ...
Old 08-18-2013, 09:22 PM   #1 (permalink)
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Stricter luxury tax penalties in new CBA could actually help big market teams
Brett Pollakoff Aug 18, 2013, 3:30 PM EDT

The NBA’s lockout prior to the 2011-12 season was certainly all about money, and how the owners could channel more of the league’s revenue into their pockets instead of those of the players.

But it was also about putting a system in place that would, in theory, make it more difficult for the teams in the largest markets to simply spend their way to a title.

While the new, harsher luxury tax penalties put into place make it severely punitive financially to go out and exceed the tax threshold season after season, there is a loophole that exists which works to the advantage of the large market teams in the long run, while working against their small-market counterparts.

From Larry Coon at HoopsWorld:

The first year of the repeater tax (2015) will only apply to teams that were also taxpayers in the three previous seasons — 2011-12 through 2013-14. So right now, only Boston and the Lakers are candidates. The Celtics will probably stay out of the tax this season, and the Lakers are clearing the books next summer. So I don’t think any team will be a repeater in 2015.

Starting in 2016 a team is a repeater if they were taxpayers in any three of the previous four seasons (for 2016 that’d be 2011-12 through 2014-15). That means any team that was a taxpayer in either 2012 or 2013 would be a repeater if they are a taxpayer in both 2014 and 2015. Most teams will be able to avoid the repeater penalty. A few teams like Brooklyn probably won’t care.

The system is set up — well, “set up” is probably a bad way to put it. I don’t think they did it intentionally — so that two years out of the tax buys you three years IN the tax without being a repeater. I think many teams will adopt this strategy.

That last part is the key.

Take a team like the Celtics, for instance, who had no problem committing to payroll that would put them over the tax threshold when they were trying to contend for a title over the last few seasons. They’re rebuilding this year and next at minimum, but after those two years out of the tax, they could add free agents and load up for another run at a title by spending whatever it costs for the next three seasons, all the while avoiding the dreaded repeater tax.

There are very few teams that won’t try to implement this strategy. This summer, we saw the Heat use the amnesty provision to waive Mike Miller, even after he was a part of winning back-to-back titles, because the move saved them a total of $17 million in salary and luxury tax costs. And we saw the Lakers make a similar move to cut costs when they waived Metta World Peace.

The Nets are one club that doesn’t seem to care about dollars, but they’re certainly in the minority. Most large market teams will use payroll to chase championships when the talent on the roster dictates it. Small market teams, wary of even the more basic tax threshold, still won’t be able to meet that standard.
This speaks volumes to the posters that harp on the Raptors tax and penalty aversion, as it applies to signing and trading for players.


Stricter luxury tax penalties in new CBA could actually help big market teams | ProBasketballTalk
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Old 08-18-2013, 10:57 PM   #2 (permalink)
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piece of crap
this article makes it look like going in and out the luxury tax is a choice ...

It's not like if you are competing for a title you are going to gut your team for a year to save money.

and his examples are bad too, miami is still in the luxury, they waived miller to save on the bill, proving the system works. And the Lakers are and would have gladly been even more into luxury.

teams are clearing the books not because of the luxury "loophole", because they need cap space to sign players.

Finally, how is this supposed loophole helping big market teams?
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Old 08-19-2013, 11:18 AM   #3 (permalink)
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Originally Posted by moremilk View Post
piece of crap
this article makes it look like going in and out the luxury tax is a choice ...

It's not like if you are competing for a title you are going to gut your team for a year to save money.

and his examples are bad too, miami is still in the luxury, they waived miller to save on the bill, proving the system works. And the Lakers are and would have gladly been even more into luxury.

teams are clearing the books not because of the luxury "loophole", because they need cap space to sign players.

Finally, how is this supposed loophole helping big market teams?
Yeah it doesn't make much sense. I can't imagine a team with a well built squad that could contend for a title would just dump their team and start over to get under the tax threshold. I guess Memphis could be an example of that, if have to look at their numbers. But I just don't see this making sense for the Lakers, and other big market teams who's fans demand a winner annually.
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Old 08-19-2013, 11:42 AM   #4 (permalink)
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Originally Posted by moremilk View Post
Finally, how is this supposed loophole helping big market teams?
I think it helps big market teams because they are the only ones who are willing to continually be in the tax to field a contender. Both the Thunder and Pacers are unwilling to enter the tax, but if the Lakers and Knicks had their rosters, they would happily pay tax to keep everyone.
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Old 08-19-2013, 06:49 PM   #5 (permalink)
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^----------agree


Helps big market teams because they still have a strategy to avoid big tax when they feel they want to.

They can create a new law that says your first speeding ticket on the road is standard, next is 10 times the fine and next is 25 times the fine, but your record is completely clear in 3 years.

Poor folks (like OKC), are terrified after one ticket. Rich folks (LAL, NYK) may keep keep flooring it after one ticket and stop after 2? 3? Maybe if it was not cleared from your record, rich folks wouldn't rack up 2 and 3 tickets to everyone else's one.

I.e. The OKC's are even more afraid of the tax, but the big spenders are the only ones capable of using it as a timely scheme.
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Old 08-19-2013, 09:47 PM   #6 (permalink)
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Not sure how this is a loop hole when its exactly what was intended.
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Old 08-19-2013, 10:15 PM   #7 (permalink)
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Originally Posted by d00little View Post
I think it helps big market teams because they are the only ones who are willing to continually be in the tax to field a contender. Both the Thunder and Pacers are unwilling to enter the tax, but if the Lakers and Knicks had their rosters, they would happily pay tax to keep everyone.
yeah, but I fail to see how this supposed loophole is helping them. The way it was explained is that big market teams can now stay out of the luxury tax (i.e. have the same salary cap space as the Indianas of the world for 2 years out of 5) in order to avoid paying huge bills as repeat offenders. In other words, before the new CBA, big market teams would stay in the tax all the time and now they have a loophole where they can stay under for 2 years our of 5 and that's helping them ???

Like JoJo said, if anything, this is the intended behaviour, it provides an incentive for big spenders to, at least part of the time, spend as much as everyone else.
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Old 08-20-2013, 06:39 PM   #8 (permalink)
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Not sure how this is a loop hole when its exactly what was intended.
This was intended to help even the playing field between small and big market teams, but has it really done that? If there was no tax, OKC would have kept James Harden and nobody would doubt what the Indiana will be able to keep their entire roster.
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Old 08-20-2013, 07:19 PM   #9 (permalink)
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They could have made it more effective. I was hoping there were 2 things that could have been addressed in the new CBA.

1. Throwing a monkey wrench in the superteam schemes.

2. Making the re-distribution of tax money from the rich teams to the poor frustrating and annoying enough that it is a deterrent.
i.e. so much tax money funneled to poorer teams as a penalty that they are no longer poor and the rich teams realize that the subsidy ends up hurting them.
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Old 08-20-2013, 09:08 PM   #10 (permalink)
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Quote:
Originally Posted by d00little View Post
This was intended to help even the playing field between small and big market teams, but has it really done that? If there was no tax, OKC would have kept James Harden and nobody would doubt what the Indiana will be able to keep their entire roster.
Its a COLLECTIVE bargaining agreement. It was never intended to do that, 100%.

Last edited by JoeyJoJo Shabbadu; 08-20-2013 at 09:11 PM.
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Old 08-20-2013, 09:55 PM   #11 (permalink)
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If I recall, the biggest resistance to harsh luxury penalties were the players, because ultimately they are the losers when teams can't throw money left and right without worries ...
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Old 08-20-2013, 10:24 PM   #12 (permalink)
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Quote:
Originally Posted by moremilk View Post
If I recall, the biggest resistance to harsh luxury penalties were the players, because ultimately they are the losers when teams can't throw money left and right without worries ...
What I recall is harsh luxury penalties were still better than a hard cap.
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