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Knicks and Mavericks hit hardest by luxury tax
By Art Garcia, NBA.com
Posted Jul 8 2009 8:03AM
The Knicks and Mavericks are each required to pay more than $23 million in luxury tax on their 2008-09 payrolls, according to documents obtained by NBA.com and distributed to all teams Tuesday. The league also expects revenues to fall this season and has warned teams to plan accordingly.
Seven teams overall were subject to the tax, which totaled more than $87 million overall. The 23 teams below the tax threshold of $71.15 million last season will each receive payments of $2,911,756 (1/30th of the total tax).
The remaining $20.4 million of undistributed tax funds will be allocated to the league's Revenue Assistance Plan, which distributes money to low-revenue teams for the 2008-09 season.
Luxury tax for 2008-09 Here's a look at the teams that have the highest luxury tax payment due from the 2008-09 season. Team Tax Payment Knicks $23,736,207 Mavericks $23,611,661 Cavaliers $13,707,010 Celtics $8,294,664 Lakers $7,185,631 Trail Blazers $5,899,356 Suns $4,918,136
Total: $87,352,665
Each team is also receiving approximately $6.8 million in escrow, which is a result of a decrease in total player costs from the $2.277 billion to $2.072 billion. The $204.9 million reduction reflects the maximum 9 percent reduction allowed under the collective bargaining agreement.
The cash portion of the escrow ($6.468 million per team) is expected to be paid by July 29. Luxury-tax teams are required to make their payments (minus the escrow) by July 22.
New York and Dallas each had payrolls in excess of $94 million last season. The Knicks have the highest luxury tax expense at $23,736,207. The Mavericks were next ($23,611,661), followed by the Cavaliers ($13,707,010), Celtics ($8,294,664), Lakers ($7,185,631), Blazers ($5,899,356) and Suns ($4,918,136).
Basketball-related revenues (BRI) for 2008-09 were $3.608 billion, with $2.146 billion distributed to player salaries. Another $130.8 million were paid in benefits. Salaries and benefits accounted for 63.1 percent of the BRI, pre-escrow.
The league projects BRI to decrease in 2009-10 somewhere from 2.5-5 percent. If BRI were to decrease by 2.5 percent, the salary cap for 2010-11 would be approximately $53.6 million and the team tax level would be approximately $65 million. If it falls 5 percent, the cap would be about $50.4 million and tax level $61.2 million.
Teams were cautioned to be aware of the projected BRI decrease and adjust their business plans. The anticipated drop is based on the current economic conditions.
The salary cap for the 2009-10 is $57,700,000, with the minimum team salary at $43,275,000. The tax level is $69,920,000.
Maximum player salaries for this season are as follows: 0-6 years of service at $13,520,500, 7-9 years at $16,224,600 and 10-plus year at $18,928,700. The mid-level exception was set at $5,854,000 for 2009-10, with the bi-annual exception at $1,990,000. Teams that use any portion of the bi-annual last season aren't eligible to use it this season.
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