FanPost

Salary Cap and the Clippers

I felt like this FanPost from Citizen ClippersUK was a good candidate for the front page. August is a good month for musing on philosophical NBA topics, and what could be more philosophical than the nature of the salary cap and it's impact on competition. I'm going to jump in at the end of the post with some of my thoughts, rather than putting them in the comments. Hey, it's my blog. I can do that.

This is a post I've been wanting to write for a while but this article on nba.com has given me a reason to write this. Please be aware (and therefore not too critical) of my lack of understanding of all the nuances of the NBA salary cap - I'm writing this as I see it.

Whilst looking at the different payroll levels for all the nba teams on hoopshype, I noticed that not suprisingly, the teams favoured to go far in this years playoffs are all the teams at the top of the list. This is the Lakers, Cavs, Celtics, Spurs, Magic and to a lesser extent the Jazz and Hornets.

I understand that there are numerous reasons for having a salary cap within a sporting environment (try to keep playing field level, stop teams spending beyond their means), I've never quite understood why there are so many ways to get around the cap limit within the NBA and why the only punishment is the luxury tax.

Maybe someone could explain why there is a 12M gap between the salary cap and the tax threshold? Surely, the tax threshold should take over as soon as a team is 1 dollar over the salary cap?

Any why should teams be allowed over it at all? Surely, DTS, for all is faults is a businessman and as his organisation is making good money, he'd be foolish to go spending silly money on deals and get his team into luxury tax areas.

However, for other owners that are more driven by the success of the franchise and also, maybe either have bigger pockets or more income for their team, why not blast away and gain success whilst sitting in the luxury tax levels.

If the Lakers win the NBA again this year, is it really a win on a level playing field? It is yes, because all the teams operate under the same rules. You could look at it another way and disagree though because they've spent more on salaries than any other team, meaning more stars are on that roster.

My point is that teams that stick to being under the salary cap are never going to win the NBA Finals. If that is the case, then why have it?

I think it should definately be a cap that teams are forced to sit below apart from extraordinary circumstances (of which I'd have to give deeper thought!). Surely then, you'd have a more even playing field and there would be more teams capable of going far in the playoffs, making the season more unpredictable and that would potentially have a knock on effect of getting more fans back watching it again. It would also help the teams in the current economic climate by not being millions over the salary cap.

So who wouldn't be in favour of that? The players, as these inflated salaries would have to come down in order to fit under the cap. Also, what about the NBA organisation? I'm sure the luxury tax payments are a lovely income for them for doing absolutely nothing. The extra 40M from the Lakers this year would need to be found elsewhere.

Where does leave the Clippers? Hoping that we can put together a team of young stars with a bit of experienced mixed in that could be contenders in a couple of years. I'd love that to happen but feel it never will while the salary cap is as it is. When Blake, EJ, DJ, Thornton, finish their rookie deals and want more money, that cap space will have to come from somewhere so players like Baron, Camby and Kaman will likely be gone to make room. This will then turn over and new youngsters on rookie deals will come in. Look at the Lakers, Celtics, Spurs. Their roster is packed with high salaries and experience.

We are not only fighting all the other teams on the court but as our owner is a businessman, we are fighting the NBA rules themselves. Who is wrong and who is right - DTS for following the rules in order to get the best business return or the NBA for introducing a cap that may as well not be there?

http://www.nba.com/2009/news/features/david_aldridge/08/04/aldridge.labor/index.html
http://hoopshype.com/salaries.htm

Steve's Addendum.

A few points of clarification. Be careful with the HoopsHype data, especially in the off-season. Dallas is currently 12th on the list - but that does not include the salaries of Jason Kidd or Shawn Marion. Of course, it's not surprising that Dallas is near the tops of the league in salary - it's been true for years, and they've made the playoffs consistently for years as well.

Also, the suggestion that the NBA likes the luxury tax system in part because it is 'found money' to them is not true. Luxury tax payments get redistributed to a couple of places - some goes to the NBA’s Revenue Assistance Plan which distributes funds to low revenue teams an escrow account that (I believe) is in place for the player's association's pension fund, and most of it gets redistributed out to the teams UNDER the salary cap: the NBA does not keep any of the luxury tax payments for itself. This redistribution system is an important point though - teams have a double incentive to remain under the tax threshold, first to avoid paying the tax, and second to participate in this windfall of tax payments.

On to some of the larger questions. The biggie of course is why is there both a salary cap and a luxury tax threshold, and it's corollary, why are there so many exceptions? The exceptions are in place for a simple reason - to allow teams to continue to improve, within certain limitations, regardless of the cap. The biggest exception of course is the Larry Bird free agency exception - the idea is that in order to allow teams to build fan loyalty, they can re-sign their own free agents for amounts over the salary cap. The namesake for this exception illustrates the league's goal - Larry Bird played his entire career for the Celtics.

As compared to other professional sports leagues with salary caps (like the NFL and the NHL), the NBA uses a 'soft cap' meaning it's fairly easy to circumvent it. You can think of the luxury tax threshold as the 'hard cap' where (like in the NFL) penalties begin to kick in. However, it's still 'soft' in the sense that it can be circumvented easily, as long as the team is willing to pay the toll.

Do the teams that spend the most win the most? Yes and no. As with most things, there are plenty of exceptions to the rule. There are several examples of teams that spent profligately, but managed to lose despite their massive payrolls. The Knicks are the best example - until this off-season they had the league's highest payroll for many years in succession, and still managed to be near the bottom of the league in wins and losses. And although things look much better in Portland now, it was only a couple of seasons ago that they were paying the luxury tax while missing the playoffs.

On the other end of the spectrum, the Spurs have for years been the poster child for winning while maintaining some semblance of fiscal responsibility. The fact that their payroll has climbed above the luxury tax finjallyis a reflection of past success (Duncan, Ginobili and Parker make $45M between them, and two of them are arguably underpaid) combined with a final push to remain relevant (adding Richard Jefferson). But the Spurs have won multiple NBA titles without paying the luxury tax - a fact that is frequently used to argue that the playing field is plenty level, as long as you are smart.

It seems to me that this summer has exacerbated some trends. In many if not most professional sports there is a system of the haves and the have nots. This is most obvious around the time of the trade deadline - and let's face it, it makes perfect sense for all involved. A good but expensive player on a weak team with no chance of making the playoffs is dealt to a title contender for expiring contracts and draft picks. It's a win-win trade, right? The contending team gets stronger now at the expense of their cap situation and their future, while the poor team gets weaker now while improving their future.

This is not a bad system, provided the pendulum eventually swings. Some poorly run or penny-pinching teams (the Clippers, Grizzlies, Warriors, T-Wolves and others would be candidates in one or both of these categories) remain constantly in rebuilding mode through their own incompetence. But it's also true that simply throwing money around is NOT the way to build a winning team - look no further than Milwaukee, where in recent years they've given large contracts to Michael Redd, Bobby Simmons, Dan Gadzuric and others, but are now a financial and competitive mess.

Lately, it seems like this trade-deadline-thinking is getting pushed out further and further. It's not surprising or disheartening when a team gives up on the season in February when they're 20 games off the playoff pace. Informed fans welcome a trade that increases financial flexibility and brings in draft picks in that situation - heck, if you're not making the playoffs, you might as well be as bad as possible and get a good draft pick. But this summer myriad teams are giving up on the season before it has even begun. The aforementioned Bucks, the T-Wolves, the Kings, the Nets, the Knicks - none of those teams has any intention of being competitive this season. Part of that is due to the 2010 free agency market (though let's face it, only the Knicks and the Nets have any shot at the marquee guys). Teams look at Kobe and the Lakers, LeBron and the Cavs and they think - we can't beat those guys any time soon. So they push their two year plan out to a three or four year plan. Of course, four year plans don't ever work, but that's another story.

I wish I knew more about the salary caps in other league's so I could properly compare and contrast them. European soccer and Major League Baseball are the best examples of leagues with no cap at all - which leads to Chelsea paying £114 and Sunderland £17 in salaries. Or gives you the Yankees. Yuck. As for the NFL, it seems to me that the bigger difference there has to do with the lack of guarantees on contracts (I'm not sure what their definition of 'contract' is in fact given that they just seem to cut guys and stop paying them whenever they like). Any NFL junkies out there care to enlighten us some as to how that cap works: perceived advantages and disadvatages?

As for the subject at hand, I would not expect Donald Sterling to ever go over the luxury tax threshold - the majority of the league treats it as a hard cap and that precedent is fine with him. The experience of the Nuggets over the last few years is probably all the justification most owners need for remaining under the cap. They spent like crazy for awhile, and never won a playoff series. And when they decided to shave salary, the went to the Western Conference Finals. It doesn't mean that spending less equals winning more - it does mean that you have to spend smart.

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