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Everyone, even non-NBA fans, have heard by now that the NBA players are locked out and the owners are playing very tough in negotiations on the new contract.

The players are being asked to cut off an arm and leg from their previous contract largess to help save the league and owners from themselves. The players are naturally offended by this situation. They agree that the previous contract may have been overly generous but that doesn’t mean the players should be asked to be the sole contributors to the solution.

Now naturally many of the owner’s demands are likely ploys to force the players to give up something they actually desire in exchange for these positions such as the Hard Cap sacrifice for instance.

So what are the real issues being debated?

First let me say that I am not in the meetings nor privy to any inside information about the discussions but I can read and all of what I am about to discuss can be found from the writings of others who are talking to people on the inside. This is not intended to be a blog breaking news. I will simply try to clarify the issues being discussed and put my particular spin on what this means and possibly where the compromises lie.

The main issues being discussed this weekend are the following:A tiered luxury tax, an amnesty clause allowing teams to cut one bad contract,making guaranteed contracts end after 3 seasons vs. the four they currently max out at,a redesign of Larry Bird Rights,changing the exceptions rules,a new rule attacking the practice of traded players being allowed to sign longer term contracts andreducing the total value of contracts per team.

I will be addressing each issue individually over the next week. First up the luxury tax issue.

The Super Luxury Tax

The Proposal – the owners want to create an increasing scale of luxury tax penalties versus the simple dollar for dollar tax currently in place for teams over the salary cap.

What it means: The exact owners proposal is unclear but it appears the higher you go over the limit the greater the fiscal penalty for doing so. So if the luxury tax threshold is $65 million then teams would pay a dollar for dollar tax over that amount until the team reached the next level say $70 million. Above that amount the fine would be two dollars for every dollar over until the next level was breached.

How great a fine is the issue. Understand that the core issue here is not competitive balance of the league no matter how often David Stern makes that case. The issue is simply controlling salary escalation. The players don’t want their earning potential capped and the owners want the players to agree to protect them from themselves. This proposal does in theory allow salaries to escalate but in practice will have the very real effect of limiting salary escalation.

The Reasonable Solution: So the owners have dropped their demand for a hard cap…or did they? While not stating that a hard cap exists the proposal makes it highly unlikely teams would exceed the luxury tax level by a large amount. The cost would be too high after a while. It’s not as restrictive as a simply hard cap and does allow the players contracts to be guaranteed, an issue the union formerly said was non-negotiable.

You must understand that a hard cap would require teams to be able to not pay contracts if the team goes over the cap. Otherwise a hard cap can’t exist. Under this compromise the owners put in place a pseudo hard cap by punishing owners who go way over but don’t punish the players by having their contracts voided. Let’s not forget the players have already agreed to this in principle when they accepted the original luxury tax penalty in the collective bargaining agreement. The players don’t object to a penalty but they don’t want it to be so severe that it actually prevents teams from exceeding it.

So the likely outcome is that the players agree to the sliding scale but want to limit the effect to only the most blatant violators.

Next Up: The Amnesty Clause

 

 


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