In principle, the luxury tax system makes perfect sense. NBA teams who overspend are forced to pay the price for their extravagance. Except, NBA owners don’t conduct themselves like normal people. To Mark Cuban, Mikhail Prokhorov and others, a few millions of dollars isn’t that much; therefore, they disregard the luxury tax and spend wildly to put a championship-caliber team on the floor.
The new CBA, which was negotiated prior to this past season, tried to further penalize the Mark Cubans of the world. NBA Commissioner David Stern urged not only for greater revenue sharing to allow smaller markets to spend more money but also for restrictions on the financially reckless owners. In particular, the new CBA stipulates that teams, who repeatedly pay the luxury tax and/or exceed the tax line, will be “punished” and thus, forced to pay an even greater luxury tax. These teams, moreover, will face restrictions on signing free agents and making trades because of the luxury tax.
The only problem is that Stern’s sweeping changes don’t come into effect until 2012-2013; as a result, the usual free-spending teams are allowed to run up their check books and extort the old system. The large markets, then, continue to follow the Heat’s blueprint of 2010, scrapping under-achieving rosters and paying boatloads to assemble a group of superstars. For example, the Lakers added Steve Nash this off-season. The Nets, meanwhile, have re-tooled their entire roster based on two max-contract players. Brooklyn, furthermore, could be adding Dwight Howard, another max-contract guy, in the next few days.
On a grander scale, the Miami Heat have started a trend that doesn’t reward player development or clever salary-cap maneuvering. The NBA, at least for now, is a complete autocracy, where only the rich and ruthless can survive.
Oklahoma City is the only exception; Russell Westbrook and Kevin Durant’s combined greatness defies the trend. Otherwise, the NBA has become a first cousin of baseball, in which the Yankees and Red Sox outspend their competitors. The new CBA, hopefully, will usher in change.