Alex's ticket: Warriors luxury tax, a boon to the NBA?

Alex’s ticket: Warriors luxury tax, a boon to the NBA?

$500 million. This is the staggering amount the Warriors could spend on accrued salaries and luxury taxes during the 2023-24 season. It’s huge. This is an all-time record that raises a lot of questions and criticisms about pay equity between the different NBA franchises. Let us question ourselves, let us criticize the current system. Obviously, there are blind spots, but let’s also highlight another obvious fact: In many ways, what Joe Lacob and his associates are doing is a boon to the NBA.

The numbers fell on the Warriors’ side. On Saturday night, $140 million over four years was put on the table for Jordan Poole. A large amount that suggested the Warriors would wait to see what Draymond Green would like to do with his player option next summer before incurring any other expenses. That was underestimating Joe Lacob’s determination. Hot on Poole’s heels, Andrew Wiggins was offered a four-year, $109m extension. Two extensions that will take effect in one year, when Steph Curry will enter a season at $51 million, Klay Thompson $43 million and Draymond therefore potentially $27.5 million. In the 215 million salaries to be paid, in just 12 players under contract and almost 270 million in luxury tax that goes with it. Yes, that is already 485 million. The famous 500 million is not far off and will most likely be reached once the roster is completed, as noted by “capology” expert Bobby Marks.

The numbers are astronomical. The salary cap exploded. The luxury tax threshold is far in the rearview mirror. The record for amounts paid in “salaries” for a homeowner will soon be shattered.

On Sunday I was reading the reactions after these announcements of extensions in the Warriors. In short, I was scrolling on Twitter and elsewhere on the Internet. Many bitter observers and fans shared a sense of injustice. To some, the Warriors don’t play by the rules. Either ! For others, the Warriors take advantage of rules that are too soft to really guarantee the famous salary equality essential for the proper functioning of the NBA. An NBA whose authorities should investigate this case and trust him to modify the CBA (Collective Bargaining Agreement) as soon as possible. Why not. In any case, surely a discussion could be (and will be) opened on the subject to assess the possible harmful impact of this strategy by the Warriors’ owners. Because it is indeed a strategy in question.

As I read these outraged and sometimes even angry reactions, I felt embarrassed because I didn’t agree with most of them deep down. That fans or observers bristle at the thought of seeing a team, an adversary at that, happily exploiting salary caps is completely understandable. The feeling of injustice came quickly when passion intervened. In my wanderings on the blue bird’s social network, however, I came across a tweet that spoke to me, a tweet from @Tartrou that highlighted the fact that seeing the Warriors exterminate all luxury tax records can be a good thing. .

Because basically, what is it really? The owners of the NBA franchises are all billionaires or groups of billionaires. They spend their money as they see fit, assuming more or less risk. Some are ready to pull out the checkbook when needed, others are harder to convince because they are there for profit first and foremost. Which is not so easily compatible with generous spending for the incredible purpose of winning. And yes, win. Wouldn’t that also be an important goal for any sports club owner? When we take into account some important figures of the epic Joe Lacob at the head of the Warriors, we can see that his strategy works, that winning economically and sportingly are not incompatible. Come on, two pretty clear numbers: Lacob and his group bought the Warriors for 450 million dollars in 2010. Today, the franchise is estimated at more than five… billion dollars. Because the NBA business is booming, because the Warriors are also winning, because they have a strong identity, because Stephen Curry, of course. Because the owner did not hesitate to invest in it. It’s still interesting to note that as late as 2015, the Warriors were still among only three franchises to never pay a luxury tax. During the first five years he spent running his franchise, Joe Lacob didn’t splurge. As soon as he started smiling at the warriors at him, he didn’t do anything wrong. He took out the competition’s checkbook and applied a strategy. It’s on his right. He exploits the current rules, at his expense, for the good of his team and possibly the league. Other owners are in this line and could imitate Lacob with the double objective of winning sportingly and ensuring good economic results. Steve Ballmer and Joe Tsai, for example, to name a few.

So what ? Is it the money that wins?

History clearly shows that it helps, but it is far from enough. The luxury tax has been in effect for 19 seasons in the NBA. They have already paid 28 teams, for a total of more than 2,000 million (before this 2022-23 season). The Warriors are obviously at the top of the biggest taxpayers with $337 million paid over five years in taxes. The podium is completed by the Nets with almost 300 million in seven years of luxury tax and then the Knicks with 248 million. We let you count the titles of the two New York franchises during the period. And if you want to see the full ranking, it’s available HERE on Forbes. You will see that the luxury tax does not necessarily rhyme with the NBA title. Money is a factor in winning trophies in elite sport, that is undeniable. But you still have to know when and how to spend it wisely. Although he accepts that the ups and downs of the field, bad luck, injuries, LeBron James or Kawhi Leonard can destroy his plan at any time.

So yes, Joe Lacob’s way of incurring huge expenses and pushing an entire system to the limit is, in a sense, a godsend.

A boon because he can encourage other owners to invest in their franchises and not just expect dividends, which would be good for the team in question, certainly welcomed by their fans and simply beneficial to the NBA as a whole. . A blessing because, each season, the amounts paid by the franchises that pay the luxury tax are donated to those who do not pay it. Owners of these (non-luxury tax) teams may complain when they see the Warriors roster, for example, but there’s no question that they’re absolutely thrilled to receive a small jackpot to improve their franchise’s financial performance or simply to stop a few holes if any. Not to mention, it helps maintain the balance of revenue sharing between owners and players.

Yes, a blessing because it can and will push interested people to question precisely the viability of the current system. How can we improve it? Should we review how Bird Rights works? Should they have a cap to prevent a franchise from exceeding the salary cap that much? Should we bring the notion of hard capitalization back on the table? Is this such a desirable solution? Is this also the guarantee of greater equity between the different deductibles? Because in the end the economic part is just one more tool to attract the best players. Basically, this Bird Rights system to cross the salary cap ceiling was put in place to allow smaller markets to keep their best players. It is the Bird Rights that today allow the Warriors to keep Stephen Curry, Klay Thompson, Draymond Green and Jordan Poole, four players recruited by Golden State. If you remove this lever from the leaders, another will gallop back to the front of the stage: the city, the market in which the franchise is based. And guess what, it could be even more unfair to smaller markets.

The flexible capitalization system, with multiple exceptions and a tax for top spenders, is far from perfect. Surely we will have to review it, update it, adapt it to the new amounts of television rights and try to make it as fair as possible. However, it doesn’t work that bad. The NBA regularly regenerates athletically. Joe Lacob shakes the habits of his fellow owners and takes a strategy too far to win with his core of recruited players. It should only be taken for what it is: high-level sport-business.

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