Salary cap Rumors
It would also mark roughly eight weeks until Christmas. Silver has told the union that there would be at least eight weeks between an agreement and the formal starting of next season. Talks between the NBA and union have been productive on making the necessary financial allowances on 2020-2021 salary cap and luxury tax thresholds to account for the massive losses in revenues from the pandemic, sources said.
Ongoing talks are centering on increased escrow taken from players’ salaries, sources said. The league and union are still awaiting full audits on the Basketball Related Income that accounts for the league’s 51-49 revenue split with players. The NBA and NBPA are working on resetting of the 2020-21 salary-cap and luxury-tax numbers based upon those audits and financial projections for the next year. This allows for teams, agents and players to have more time to prepare for the financial realities of the pandemic’s impact on the league. As the NBA Draft approaches on Nov. 18 — and free agency expected to start soon after — teams are anxious for the league to reach an agreement with the union and deliver them more certainty on the cap and tax bills.
But every extra dollar is multiplied in the Warriors’ tax bracket and without knowing exact cap numbers or the future date that Chase Center will reopen to fans, sources increasingly insist on the usage of that $17.2 million exception: It’d have to be a special opportunity. Is an overpriced mid-rotation piece considered special?
The Warriors’ luxury-tax bill already projects to be about $69 million (based on the luxury-tax line remaining flat). If the trade exception were used to acquire a $10 million player… the projected tax bill would increase by about $38 million. If the trade exception were used to acquire a $15 million player… the projected tax bill would increase by about $64 million. If the trade exception were used in full ($17,185,185)… the projected tax bill would increase by about $76 million. And that’s just the luxury tax. The acquired player’s actual salary (still to be determined in these uncertain times) would also have to be paid. Which is why Golden State probably won’t use the exception.
One of the biggest challenges will be negotiating the terms of next season’s salary cap. That number is typically derived from the league’s revenues, but the pandemic cost the league an estimated $1.5 billion, according to people not authorized to speak publicly, so that formula is untenable. A massive salary cap drop would push the overwhelming majority of the league deep into the luxury tax while drying up the free-agent market in an instant at the same time.
The most likely outcome right now is an agreement that keeps the salary cap artificially inflated, most likely at the same level it was during the 2019-20 season ($109 million per team). This would mitigate a bear market in free agency and prevent teams from facing huge unexpected luxury tax payments that would come with a steep cap drop. To make sure the owners and players maintain the roughly 50-50 split of revenue as their current deal calls for, players probably will have to agree to give up a percentage of their paychecks throughout the season to help balance those books. Just how large a cut and just how to manage getting to that even split is going to be a central part of the talks.