A BASKETBALL ECONOMICS LESSON IN BRIEF No team should ever go over the luxury tax threshold unless the owner has the "financial stamina and courage" to avoid suddenly offloading salary to completely eliminate the tax in about one year flat. If there is any chance of the owner cutting and running from the luxury tax in the future, than that owner and that team needs to remain below the luxury tax threshold at all times. At the very least, that owner and that team needs to refrain from going over the luxury tax threshold by more than 5% of the threshold, about $3.5 Million dollars recently. The Nuggets were almost $13 Million over the luxury tax threshold in 2007-08, a hefty level that only an owner who knew for sure in advance he could continue to pay the tax for at least 2-4 more years (with the tax going down each year) had any business being at. Because if you get into a situation where the team's salary is so high that it is more than about $6 million or more over the luxury tax threshold, and the owner, for whatever reason, can't stand paying the luxury tax all of a sudden, and decides to stop paying it at all costs, then the necessary cut in the team payroll is huge, and so the cost in basketball terms can end up being the destruction or near destruction of the basketball team, when having a good team was the reason for paying the tax in the first place. If you do in fact make a huge cut at once, you lose most or all of the side benefits of having paid the tax in the first place, such as the ability to attract quality players to your team at discounted salaries. Because when the team is carved up, quality players aren't going to be very interested in it anymore. Not to mention that your offensive and defensive schemes are now history, and you have to start almost from scratch with them. As you can see below, in recent years, both the salary cap and the luxury tax threshold have been going up at roughly $3 million each year. This means that if you wanted to back out from paying the luxury tax, and you simply kept the same team total payroll from one year to the next, the luxury tax would go down by roughly $3 million each year. Very little damage would occur if you did it this way. Alternatively, if you reduced the payroll slightly in a year, by say $3 million, than your luxury tax would go down by $6 million that year. So if you reduced the team payroll by about $3 million over two straight years, and the luxury tax threshold went up by $3 million each year over those two years, than you could in two years go from being almost $13 million over the luxury tax threshold, to being less then $1 million over the luxury tax threshold. This would cause some damage, but not devastation, to the basketball team. If you had a good front office, the damage could be relatively small. Reducing total team payroll by about $3 million per year is the fastest you can reduce it without doing serious damage to the team. Ideally, you should never reduce team payroll from one year to the next at all, assuming that the NBA salary cap and the NBA luxury tax threshold have not themselves gone down, which, outside of a depression, is almost certainly not going to happen. Why is $3 million the maximum possible reduction to avoid serious damage? Because that is about 5% of the total payroll, and represents a smart rule to follow if you feel you have gone hog wild, and you now want to stop paying the luxury tax. You can keep the damage to a relatively low level if when you cut the team payroll, you never cut it by more than about 5% per year. Any cut in excess of 5% means that you are doing serious damage to the team. Any cut in excess of 10% means that you are in all likelihood devastating the team. This is what the Nuggets are apparently doing right now. They are cutting such a high percentage of the team payroll all at once, that they are completely self-destructing their team. A 5% cut in payroll is actually a roughly 10% payroll cut, relative to the salary cap and the luxury tax threshold, which have been going up by about 5% in recent years. That is the maximum cut you can risk without for sure doing serious damage to the basketball team. Were you to cut the team payroll by 10%, it would really be a roughly 15% payroll cut, relative to the salary cap and the luxury tax threshold. There is virtually no way that the team will not be severely damaged with a 10% actual and 15% real, relative cut in payroll. Keep in mind that a very well managed team would seldom have to reduce their total payroll at all, either because they were able to go about their business without ever paying any luxury tax, or because if they were paying a luxury tax they never panicked and decided to stop paying the tax all at once, and/or because they at the very least were smart enough to reduce team payroll at a careful rate, without throwing the baby out with the bathwater. The offloading of Marcus Camby's salary is a textbook example of what not to do, and is smoking gun evidence that the Nuggets franchise is not being managed correctly. Mr. Kroenke can gradually reduce his luxury tax and avoid being considered a failed owner, but he can't make a sudden, massive, huge cut in the team payroll and avoid that tag. NBA SALARY CAP BY YEAR 2008-09 $58.68 Million 2007-08 $55.63 Million 2006-07 $53.135 Million 2005-06 $49.5 Million 2004-05 $43.9 Million 2003-04 $43.8 Million 2002-03 $40.3 Million 2001-02 $42.5 Million 2000-01 $35.5 Million 1999-2000 $34 Million 1998-99 $30 Million 1997-98 $26.9 Million 1996-97 $24.4 Million 1995-96 $23 Million 1994-95 $15.9 Million 1993-94 $15.1 Million 1992-93 $14 Million 1991-92 $12.5 Million 1990-91 $11.9 Million 1989-90 $9.8 Million 1988-89 $7.2 Million 1987-88 $6.2 Million 1986-87 $4.9 Million 1985-86 $4.2 Million 1984-85 $3.6 Million Teams being over the cap is the norm, because it is a soft cap, and there are numerous "exceptions" that can be used for a team to legally go over the cap. On the other hand, if a team goes way over the cap, than the luxury tax kicks in. The luxury tax rule has only been in effect as from 2002-03. The tax owed is the amount by which a team's total salary exceeds the luxury tax threshold. HISTORY OF THE NBA LUXURY TAX THRESHOLD NBA LUXURY TAX THRESHOLD BY YEAR 2008-09 $71.15 Million 2007-08 $67.865 Million 2006-07 $65.42 Million 2005-06 $61.7 Million 2004-05 0 2003-04 $54.6 Million 2002-03 $52.9 Million NUGGETS SALARIES 2002-09 NUGGETS 2007-08 SALARIES 1 Allen Iverson $19,012,500 2 Kenyon Martin $13,250,000 3 Carmelo Anthony $13,041,250 4 Marcus Camby $11,250,000 5 Nene Hilario $8,840,000 6 Eduardo Najera $4,952,380 7 Steven Hunter $3,248,000 8 Chucky Atkins $3,000,000 9 J.R. Smith $2,134,067 10 Anthony Carter $1,103,225 11 Linas Kleiza $1,011,360 12 Von Wafer $770,610 13 Bobby Jones $687,456 14 Yakhouba Diawara $687,456 15 Taurean Green $427,163 16 Mike Wilks $162,281 17 Jelani McCoy $151,089 TOTAL 83,728,827 NUGGETS 2006-07 SALARIES TOTAL 1 Allen Iverson $17,184,375 2 Kenyon Martin $12,068,182 3 Marcus Camby $8,800,000 4 Nene Hilario $8,000,000 5 Carmelo Anthony $4,694,041 6 Eduardo Najera $4,571,428 7 Reggie Evans $4,000,000 8 J.R. Smith $1,387,560 9 Steve Blake $1,330,000 10 Linas Kleiza $945,360 11 DerMarr Johnson $865,063 12 Jamal Sampson $771,331 13 Ivan McFarlin $412,718 14 Yakhouba Diawara $412,718 15 Jefferson Sobral $75,000 TOTAL $65,517,726 NUGGETS SALARIES 2005-06 1 Kenyon Martin $10,636,364 2 Marcus Camby $9,150,000 3 Andre Miller $8,100,000 4 Earl Watson $5,000,000 5 Eduardo Najera $4,190,476 6 Carmelo Anthony $3,713,640 7 Voshon Lenard $3,520,000 8 Nene Hilario $3,039,889 9 Earl Boykins $2,750,000 10 Greg Buckner $1,670,000 11 Julius Hodge $1,148,760 12 Bryon Russell $1,138,500 13 Linas Kleiza $879,360 14 DerMarr Johnson $835,810 15 Francisco Elson $719,373 TOTAL $56,492,172 NUGGETS SALARIES 2004-05 1 Kenyon Martin $9,454,546 2 Marcus Camby $8,500,000 3 Andre Miller $7,366,667 4 Eduardo Najera $3,809,524 5 Carmelo Anthony $3,471,360 6 Voshon Lenard $3,250,000 7 Nikoloz Tskitishvili $2,910,600 8 Earl Boykins $2,500,000 9 Nene Hilario $2,260,280 10 Rodney White $1,797,845 11 Wesley Person $1,600,000 12 Bryon Russell $1,100,000 13 Greg Buckner $870,046 14 Mark Pope $870,046 15 DerMarr Johnson $745,046 16 Francisco Elson $620,046 17 Luis Flores $385,277 18 Arthur Johnson $385,277 TOTAL $51,896,560 NUGGETS SALARIES 2003-04 1 Marcus Camby $7,250,000 2 Andre Miller $6,400,000 3 Carmelo Anthony $3,229,200 4 Jon Barry $3,000,000 5 Voshon Lenard $2,750,000 6 Nikoloz Tskitishvili $2,721,000 7 Earl Boykins $2,500,000 8 Nene Hilario $2,256,000 9 Rodney White $1,947,600 10 Michael Doleac $1,500,000 11 Ryan Bowen $1,250,000 12 Mark Pope $689,000 13 Jeff Trepagnier $639,000 14 Chris Andersen $639,000 15 Chris Marcus $367,000 16 Francisco Elson $366,931 TOTAL $37,504,731 NUGGETS SALARIES 2002-03 1 Juwan Howard $20,152,000 2 Marcus Camby $6,750,000 3 Nikoloz Tskitishvili $2,530,000 4 Nene Hilario $2,099,000 5 Shammond Williams $1,970,000 6 Rodney White $1,820,520 7 James Posey $1,723,606 8 Ryan Bowen $1,111,111 9 Mark Bryant $1,030,000 10 John Crotty *$1,030,000 11 Chris Whitney $1,000,000 12 Donnell Harvey $992,040 13 Mark Blount $763,435 14 Jeff Trepagnier *$512,435 15 Kenny Satterfield *$512,435 16 Chris Andersen $512,435 17 Predrag Savovic $349,458 18 Junior Harrington $349,458 19 Adam Harrington *$349,458 20 Devin Brown *$349,458 21 Vincent Yarbrough $349,458 TOTAL $43,502,521
<div class='quotetop'>QUOTE (tremaine @ Jul 19 2008, 07:51 PM) <{POST_SNAPBACK}></div><div class='quotemain'>A BASKETBALL ECONOMICS LESSON IN BRIEF No team should ever go over the luxury tax threshold unless the owner has the "financial stamina and courage" to avoid suddenly offloading salary to completely eliminate the tax in about one year flat. If there is any chance of the owner cutting and running from the luxury tax in the future, than that owner and that team needs to remain below the luxury tax threshold at all times. At the very least, that owner and that team needs to refrain from going over the luxury tax threshold by more than 5% of the threshold, about $3.5 Million dollars recently. The Nuggets were almost $13 Million over the luxury tax threshold in 2007-08, a hefty level that only an owner who knew for sure in advance he could continue to pay the tax for at least 2-4 more years (with the tax going down each year) had any business being at.</div> I stopped reading after this. 1) Your thesis is crap. It presumes that one can't and shouldn't learn from previous results. 2) The Nuggets were more than $13 million over the luxury tax threshold for the 2007-2008 season. 3) Stan could easily afford that tax level and more 4) You have implied falsely that dropping salary impacts wins.
<div class='quotetop'>QUOTE (cpawfan @ Jul 19 2008, 07:01 PM) <{POST_SNAPBACK}></div><div class='quotemain'><div class='quotetop'>QUOTE (tremaine @ Jul 19 2008, 07:51 PM) <{POST_SNAPBACK}></div><div class='quotemain'>A BASKETBALL ECONOMICS LESSON IN BRIEF No team should ever go over the luxury tax threshold unless the owner has the "financial stamina and courage" to avoid suddenly offloading salary to completely eliminate the tax in about one year flat. If there is any chance of the owner cutting and running from the luxury tax in the future, than that owner and that team needs to remain below the luxury tax threshold at all times. At the very least, that owner and that team needs to refrain from going over the luxury tax threshold by more than 5% of the threshold, about $3.5 Million dollars recently. The Nuggets were almost $13 Million over the luxury tax threshold in 2007-08, a hefty level that only an owner who knew for sure in advance he could continue to pay the tax for at least 2-4 more years (with the tax going down each year) had any business being at.</div> I stopped reading after this. 1) Your thesis is crap. It presumes that one can't and shouldn't learn from previous results. 2) The Nuggets were more than $13 million over the luxury tax threshold for the 2007-2008 season. 3) Stan could easily afford that tax level and more 4) You have implied falsely that dropping salary impacts wins. </div> I understand that most posts are disagreements, because people who agree don't generally bother posting. I also understand that everyone can post whatever they want, wherever they want. But cpawfan, please for your own sake take my advice and stop posting in my topics. Consider this logically. You disagree with me 100% of the time. Many disagreement posts are actually partial agreement and partial disagreement posts, whereas yours are always 100% disagreements. And they are always derogatory to one extent or another also. You have 100% disagreed with every single one of my points in at least 36 straight instances now. You have continually written short phrases indicating that you disagree with everything, and that I "have no credibility." So at this point, anyone reading your posts in a tremaine topic is going to conclude either that you are wasting your time reading my topic again, if they agree with you that I never know what I am talking about. Or they are are going to ignore your post because they know you automatically disagree with me. So you are not doing anyone any good by posting in a tremaine topic. Isn't it silly for you to post that you didn't read my post, because you know in advance it is garbage, because I have no credibility? Why did you click on the topic in the first place? It's gotten to the point that it looks goofy. If you disagree with someone in every way, 100% of the time, you are not supposed to be reading their stuff! It is unhealthy for you to do so, as well as being a waste of time. i can assure you that I am never going to transform into someone that you can agree with on anything. New and occasional visitors are not going to know that you have disagreed with me in a derogatory way at least 36 straight times. Therefore, if you continue to post in my topics, I reserve the right to stamp my topics with an advance advisory stating the facts about your posts in my topics. Otherwise, people are going to be fooled. Because I definitely do not have the time to argue with you point by point, which I couldn't do if I wanted to anyway because your points are seldom totally clear to me. In order to argue with you in the past, I've actually had to argue with myself to some extent, lol. So please, I am sincerely requesting that you do not click on any topic which has been started by tremaine. When you see tremaine as the starter, do not click the topic! Why should you continue to read my stuff if I have no credibility, and if all of my points are garbage? Why should you waste your time in this way? Maybe you might do it if I was a high government official or something, to make sure I was not taking action that would ruin the country, but all I am at the moment is a basketball writer. I can not harm you in any way. So you can not possibly claim that you need to read my stuff. So please do not click on topics started by tremaine! Thank you.
So essentially you don't want the flaws in your logic pointed out? I don't dismiss your posts before reading them nor do I automatically disagree with you. You posting that tells me that you have never taken the time to actually go through my responses.
