42 Seconds: Add One Cap, Remove Another

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Published: September 29, 2011

In recent days, the focus of many articles, if not the no-go-tiations themselves, has been the imposition of a real salary cap and changes to the revenue sharing model, Previously, there seemed to be many issues on the table, such as the BRI split, all getting about equal play with revenue sharing getting few mentions.

A team-by-team salary cap is an issue vociferously opposed by the NBPA. Why this is, I’m not sure. If they were worried about the growth of the cap, it can be BRI, with the salary on the books acting as a floor. As long as the total amount of spending on player salary is relatively unchanged from today’s level and can grow as BRI does, a team-by-team cap should not be so bad in itself.

Also, salary caps typically come with salary floors. That is a concession the owners should make, but it’s basically meaningless.

For the moment, let’s assume that a real cap isn’t implemented, however. Instead, we assume the current system will be modified. One obvious modification aside from setting the tax line and `cap’ at particular numbers, the tax rate is the easiest thing to tinker with to induce cap-like effects. Where to set the line is another issue that I won’t get into here. It affects both situations discussed, so it doesn’t help draw a contrast.

One proposal that came out for revenue sharing was to share revenue generated from adjustments in players’ salary, BRI split, and tax money. In short, save money across the board, and some teams will share something less than that savings.

Taking this along with the Stern’s comment that revenue sharing will triple (at least is implied or stated . . . I can’t remember), we can assume the tax rate will increase from 1:1 to at least 3:1. I see 3 as the smallest factor, considering that revenue sharing in a passive manner is already occurring in some ways, such as the national TV money, for instance. If that money isn’t tripled and the scope of revenue sharing was meant in the larger sense, the 3 must increase. It could drop, but I see it either increasing, or becoming progressive: 2:1 for the first few dollars over, then 3:1, then 4:1, etc. I see this new system being simpler, not more complex, so I don’t expect to see pi:1, and the like.

Regardless of the cap type or level, either could have `an inconvenience level’ above which it’s harder to sign free agents, harder to make trades etc. With Bird rights and cap exceptions on the chopping block or plastic surgery table, this onion gets us crying quite quickly.

The idea of modifying the current system with a huge tax rate is a way to get buy-in from tax dynasty teams with respect to revenue sharing, as they can effectively opt out by controlling salary. If one is only worried about the bottom line for their team, they may buy into this.

If they are interested in growing the NBA, however, this may not help the issues besetting non-tax-paying teams and their title dreams, or, more importantly, their fans’ title dreams. This method would be more expensive for the `givers’, but they get players for their trouble. That fact should tell you why they want it. They see value in being able to outspend others. This is the very reason a real cap is getting a push, and the more it’s resisted, the more credence the cap gets as a part of the solution to the NBA’s woes.

While we are discussing imposing a salary cap, let’s talk about eliminating another: the max deal. This is a limit on an individual player’s salary, indexed by career length.

In the presence of a real cap, the max deal has no place.

In fact, I would argue that the max deal is the single biggest factor tax-dynasty in which we toil.

The max deal makes it possible to get great players at a discount. As the case of Miami last summer shows, an even greater discount can be achieved. If the best player in the NBA (whoever it is) is paid fairly, they would be paid significantly more than a max deal, or, more appropriately, more than a player not quite making the max.

Eliminating the max deal gives a natural economic incentive against stacking teams with top players, at least in the presence of a real cap at the team level. Eliminating the discount means teams that offer players a large deal then have less to offer other players. This already happens for some teams, but for others, the rule doesn’t apply as they have tremendous resources. Max players can get the same pay anywhere, so the discriminator between jobs boils down to other issues: market size, weather, teammates, etc. These things are clearly concentrated in a few areas, further cementing the tax dynasty.

Thus, a secondary effect of the max deal has been the inflated salaries in the NBA’s affluent middle class. These deals draw the most ire from fans, and I’m assuming the feeling is shared by the owners. The current salary system masks overpaid players as a cap issue, but it isn’t; it’s the built in bargains that are doing this. The money saved on the max deal, relatively speaking, is then spend on the next best player, and so on. This eventually tilts the market.

Additionally, the other source of discounted talent is the draft. These discounts are designed to most often favor the teams that need help. When the top draft picks are collected by tax dynasty teams in response to the win-now needs of the other teams, the balance is also upset. This, however, can’t really be fixed by changing rookie contracts or by limiting trades. Eliminating the desperation of the teams outside the tax dynasty is a potential benefit of eliminating the max deal, as well.

In the end, it’s about talent per team; ergo, evening out the talent per dollar and dollars per team are imperatives.

3 comments
Seattle Needle
Seattle Needle

Good writeup although I'm going to have to disagree with the max salary assesment. To give you some history, I actually came up with an idea back in the fall of '97. Kevin Garnett had just signed his 6 year, $120 million contract and the writing was on the wall. If he could get that money then there's no telling what players better than him would get so I wrote a ton of letters to a bunch of owners saying that instead of capping entire team payrolls in the form of a hard cap, they should put a limit on what you could pay an individual player. As fate would have it, we came up with max contracts. Now, I won't take credit for the invention of max contracts but I can honestly say that it was my idea long before it became a part of the new cba. Fast forwarding to today, we see articles saying that Kobe, Lebron and Wade would all be getting between $50 and $70 million a year in an open system. Even with a soft cap, you're looking at at least $30 million and that's just too much. If teams are losing too much money now then think what they would be losing if we had no max salaries. The entire premise of the '98 lockout was to wipeout superstar salaries and create a middle class and they did that. Stern wanted less attention on the individual and more on team. In short, he wanted corporate sponsors to market the team over the individual but they resisted. However, the economic system was saved by the entrance of max salaries and a middle class. Now, I do agree with the anti super team angle that you put in there. However, had Lebron, Bosh and Wade just taken the max then you would only have room for 2 on one team and we wouldn't have this entire super team conflict in the first place. There just isn't a way to stop players from taking a pay cut. OTOH, there are ways around it and I see progress in these lockout talks. One is the idea that only one player can be resigned using the bird exception per year. Bosh, Wade and Lebron all become free agents in the same year so something will have to give if this rule is implemented. Now, one guy can opt out early and the other 2 can wait til the final year but that still allows only 2 stars to stay and one will have to bolt. Another idea is to just allow 2 stars in the upper tier of the system meaning have a system where you only have 2 guys being paid a base salary in the $12 million and up range. That means that someone like Bosh will have to take on a base salary of less than $12 million. It's one thing to take a cut from $16.8 to $14.5 but would he go all the way down to $11.9. Probably not. Therefore, I say we should give these 2 ideas a chance before losing the concept of a max salary. Lord knows I wrote enough articles pushing the idea 14 years ago.

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There's no way to stop a guy from taking less money, agreed, but if teams can offer you $25m or $30m to not play with you friends at a rate of $15m, that's a good deal more to think about than the competing offer of $17m. With a hard cap, I like no max contract.

Seattle Needle
Seattle Needle

True. I just think the middle class is going to be wiped out. Teams are going to do what they have to do to keep the superstar guy and that means he's going to get paid a lot. With a hard cap, that leaves little money for everyone else. Like yourself, I want to limit superteams. If there is a way to do that by keeping a semi soft cap and max salaries, then it should be explored. I still think we should give the concepts being thrown around right now an open mind. Limit teams to one bird exception per year. I'll even throw in a "J.J. Barea exception" meaning that you can sign a 2nd guy above the cap if he's willing to take less than the mid level amount. For example, Dallas could use their bird rights this year on Tyson Chandler and then sign a 2nd FA provided he take less than whatever the new MLE is. I don't see Caron Butler doing that but I do see Barea or Stevenson taking it. Also, my idea of limiting teams to just 2 players in the upper financial tier seems like it would work. No more super teams and a player couldn't demand a trade to a team that already has 2 players in that range already. For example, CP couldn't ask for a trade to New York since they already have Melo and Amare making that dough. Brooklyn already has a PG so the city of NY is completely out of the question for CP. I'd say NOLA's shot at keeping CP would go way up with that in place.