L.A. Lakers: The Dollars and Cents Behind the Latest NBA Labor Proposal
How much is an NBA championship worth?
Under the old collective bargaining agreement, league owners and the NBA players union said that $58.04 million—the 2010-2011 salary cap—was a fair price.
If you valued a championship more than that amount, you could spend more than that amount. The soft cap allowed flexibility north of this range, meaning champion owners like Dr. Jerry Buss of the Los Angeles Lakers could work financial magic and amass a team of superstars for nearly double that price and face mild penalties.
Soft penalties under the soft cap.
Not anymore, say the owners this time around in the NBA's labor negotiations. Let's take a look at the latest proposal for the NBA's salary cap and how it affects the Lakers.
Where Does This Latest Proposal Stand?
1 of 8Courtesy of Sports Illustrated's Zach Lowe, details of this latest proposal were uncovered but not confirmed by either side—customary for any formal, high-stakes negotiations tango such as this.
A source close to the negotiations did explain to SI.com the specifics of the proposal, which we will dissect in the following slides.
But already, the NBA Players Union has commented that in its current state, the proposal will never be accepted because it resembles something of a de facto hard cap—a measure the players union has been opposed to for decades.
Regardless, the fact that owners over the salary cap, such as the Lakers' Dr. Jerry Buss, would agree to such strict penalties is quite telling of how badly they want to see basketball back in action.
Let's take a look at the details.
Over Tax Limit = Ascending Luxury Tax Penalites
2 of 8Under the previous collective bargaining agreement, NBA owners could exceed the salary cap and only pay $1 for every $1 over the luxury tax limit, which was $70 million last season.
A "dollar-for-dollar" luxury tax.
Not anymore. The latest proposal introduces breakpoints for luxury tax penalties on a progressive scale.
The first tier above the luxury tax is a $1.75-to-$1.00 charge for your first $5.0 million over the tax. The second tier is 50 cents more at $2.25-to-$1.00 for your next $5.0 million, and so on.
| Salary Over Luxury Tax | Penalty/$ | Max Penalty/Tier | Aggregate Total |
| $0.0 mil - $5.0 mil | $1.75 | $8.75 million | $8.75 million |
| $5.0 mil - $10.0 mil | $2.25 | $11.25 million | $20.0 million |
| $10.0 mil - $15.0 mil | $2.75 | $13.75 million | $33.75 million |
| $15.0 mil - $20.0 mil | $3.25 | $16.25 million | $50.0 million |
Impact to Laker Finances Next Season
3 of 8OK, so the Lakers with $91.3 million committed to players for the (presumable) 2011-2012 NBA season would end up paying $54.9 million in luxury tax on top of this $91.3 million.
Under the old system, the Lakers would only pay as much as they were over this $70 million luxury tax limit—$21.3 million.
A 158% increase in luxury tax for one year.
"Fine, I'll pay it," might say Jerry Buss. Can we play basketball now?
Above Tax Limit = Roster Penalties
4 of 8Nope. You can't.
If a team's salary is above the tax limit ($70 million currently), under the league's proposal, the team would lose its rights to the mid-level exception, Larry Bird exception and other transactional tools that allowed the team's salary to rise above the cap in the first place (go here for a list of these tools).
So disband your high payroll and come down under the limits agreed upon by all the owners or you won't be able to sign any superstar players in free agency or through contract extensions.
At this point, some owners might say "Fine, I'll do it" and will take a hatchet to their rosters to cut salaries.
Other owners may not.
And what's in store for these defiant owners?
Punitive Penalties for Remaining over Luxury Tax Limit
5 of 8Heavy financial penalties. Seriously heavy.
As reported by Adrian Wojnarowski of Yahoo! Sports, teams would face harsher tax penalties per dollar if they exceed the tax limit more than twice in a five-year span.
And according to Zach Lowe of SI.com, this penalty would be three times the original amount. So what was once a $1.75-to-$1.00 penalty turns into a $5.25-to-$1.00 penalty on the first $5.0 million over the tax limit.
Revisiting our table, the numbers get pretty ugly.
| Salary Over Luxury Tax | Penalty/$ | Max Penalty/Tier | Aggregate Total |
| $0.0 mil - $5.0 mil | $5.25 | $26.25 million | $26.25 million |
| $5.0 mil - $10.0 mil | $6.75 | $33.75 million | $60.0 million |
| $10.0 mil - $15.0 mil | $8.25 | $41.25 million | $101.25 million |
| $15.0 mil - $20.0 mil | $9.75 | $48.75 million | $150.0 million |
A Whopping $150.0 Million Penalty If Lakers Remain As Is
6 of 8A $150.0 million penalty per year if the Lakers keep their current team for the next three years?
Draconian is one way to put it.
They say you can't put a price on championships, but when you're paying $90.0 million per year for a team plus an additional $150.0 million in league-imposed penalties, you're approaching territory where a priceless championship starts fetching a certain price.
A very, very steep price at that.
So Why Would Jerry Buss Agree to This?
7 of 8Whether Lakers owner Dr. Jerry Buss agreed to this or whether he was strong-armed by the rest of the owners, we'll never know.
But to go forward with a proposal that so drastically alters his ability to spend on a championship team is a sign of how extreme these labor negotiations are.
Small-market owners have had it and its time to take vengeance on the large-market owners who have relished in all the success, and revenue, of years past.
The Future of This Proposal
8 of 8The players have already said "No" to this proposal, so the Lakers and their spend-free owner can live to fight another day.
But with the owners coming to terms on measures such as these, we can be sure that whatever form this new collective bargaining agreement will take, the Lakers will surely have to consider significant changes to their own.
