Posted by: Kingsguru21 | July 7, 2010

NBA has set salary cap at 58.1 million

Twitter, at the announcement of the news, had a bunch of scribes announcing this very fact. Marc Stein has the basic meat of this deal (as does any other major outlet but I like Stein so I’m going with him): The cap is at 58.1 mill, the Luxury Tax is at 70.37 mill, and oh yeah this might give Miami MORE cap room to sign LeBron James. Let’s tackle this bit by bit.

How does this effect LeBron?

It really doesn’t. Unless Miami (or any team) can offer LeBron the max, I doubt he’s going there despite whatever statements have been made. Until LeBron makes his decision, and he may be the only one who knows at this point (which is why it’s a secret), I doubt anyone really knows exactly what will happen.

I contend that LeBron could end up in Jersey, but that mostly means he’s willing to play without Bosh. I think his most likely destination is to play in Cleveland. And, unlike Michael Tillery of The Starting Five, I think LeBron will sign a full 6 year max deal and not play the FA game again. A trade is something LeBron can force to any team if he wants to.

And I’ve already seen the rumor of Miami and Toronto working out a S&T for Chris Bosh with Beasley going to TO, 2 1st rounders and Bosh getting his money. (This is possible.) If this is done, LeBron James may decide to change his mind about Miami and go there. (I doubt this but it’s possible.)

Anyway, this is all you get on LeBron.

Wasn’t the 2008-09 season the last year the salary cap would go up?

There are many people who predicted doomsday, including the NBA brass, but what ultimately happened with the cap getting nearly 2 million than anticipated? Good question. You’ll hear a lot of theories thrown around about why it went up.

One favorite of mine you’ll hear is that the Lakers & Celtics finals raised it to the point that a lot of important inroads to TV contracts were made during that 10 day period. I doubt this will be the sole reason the cap went up 2 million.

John Wall going to Washington could have helped this as he is popular and going to a large market that has been dying for a player of his talent.

I just think there was more revenue than the NBA originally anticipated and they didn’t want to set teams up by saying a higher cap was imminent. It’s easier to prepare for a lower cap and have it come out higher than it is have a cap projected to go higher and end up lower. And, this effects every team in the NBA some way. As I’ll show. I talked about this some in April, but I’ll reiterate some points with numbers that are more concrete.

What if your team is over the tax?

It reduces your tax bill is all. Which is hardly a bad thing for any team since paying luxury tax is a dollar for dollar penalty for ever dollar you’ve over the threshold (in this case 70.37 million). The Lakers, Magic, Celtics, Mavericks and teams like that all benefit from paying less tax. The Cavs also would benefit depending on whether they resign LeBron James and bring in other expensive salaries in trade. This will surely put them over the tax.

What if your team was near the tax threshold?

This is the most interesting part.

New Orleans was very near the tax threshold in the 68 million range without having enough players to field a team. Now, they can fill out their roster without going over the tax. After trading Morris Peterson to the Thunder (along with Cole Aldrich’s draft rights) for the draft rights to Craig Brackins and Quincy Pondexter, the Hornets will have 11 players under contract after Brackins/Pondexter sign with New Orleans.

What I think this means is that as long as the Hornets aren’t over the tax, and an ownership issue doesn’t force Chris Paul to publicly state he wants out, the Hornets can stay under the tax and keep this core of their team intact. If George Shinn remains the owner, that’s incredibly important as Shinn has never payed the tax since becoming owner of the Hornets.

The Indiana Pacers are another team that benefits here. The Pacers have 11 contracts that are guaranteed, 2 that aren’t in Josh McRoberts and AJ Price (both of whom Indy can pick up their options and not go over the tax) and still end up being able to sign a player or two.

The real benefit for the Pacers is trade flexibility in that they’ll be able to make trades and take money back without going over the tax or a team that will strangle them on a talent for dollars trade (similar to the Kings with Dalembert), and the like. This gives the Pacers a great deal of power to keep their players for another season without going over the tax. Then the Pacers will have finally the flexibility and cap room (assuming the cap doesn’t drop to historic levels in 2011) to do what they need to do.

The Philadelphia 76ers are an interesting team. They traded Dalembert in part to get under the tax, but you also get the sense they were looking to move him to a team that wasn’t willing to give a major poison pill in return. Nocioni and Hawes both qualify. Hawes is talented enough that he could end up giving Philly enough minutes in their system, or he gives them the flexibility to decide that he isn’t worth keeping after a season. Either way, Philly was on the hook for luxury tax at the 56.1 mill threshold and now they aren’t. Since they aren’t anywhere close to the tax threshold, now they can make any trade they want and take money back that could help the team in some way (dump a contract, take back a quality player, etc etc). Either way more flexibility doesn’t hurt a team like the Sixers.

This just helps the Spurs even more stay under the tax, and the Jazz too. The Bucks are in this boat as well after all the money they committed this off-season to John Salmons. Many teams prefer to stay under the tax as there isn’t usually a major advantage to being over the tax line. However, plenty of teams do get right up to the tax line because fielding a very competitive team usually means paying your players.

What if a team is under the cap?

I don’t think it will help much in terms of Miami signing LeBron James (but it will help them attain the 3rd max slot to sign LeBron) because the max slots for James, Wade & Bosh (because of their 7 years in the league) won’t change. (It has to do with years in the league and what not. I hate this part of the cap and projecting salaries. It’s one reason I had to ask Mark @ ShamSports about this.)

However, it does change the Kings a bit and I’ll mention that in it’s own section.

For teams like the Knicks, Nets and Bulls, this will only help them acquire a player down the road if they need to. There is plenty of those guys out there that could be had with extra salary space.

The Thunder benefit by having more space to make a deal like Morris Peterson again. (Sam Presti just knows how to do shit.) They may or not make a deal because they are at near capacity I think for young players and assets. Now it’s time for the string to play out. But you never know and having flexibility to make a trade is something that doesn’t hurt you.

Does this hurt any team? Who does this hurt the most?

I don’t see how this hurts teams who were hurting financially with player salaries. It’s one thing to be capped out and have no flexibility on one hand. But if you were the Hornets with no salary flexibility AND cash strapped it’s nice that you don’t have to shed more salary to get under the tax. That makes it easier to trade any player on your roster let alone Chris Paul. Any time you can make a trade and get the full value coming back is something that’s beneficial. I think that’s true especially with the Hornets.

This recent news does hurt the recent doomsdayer’s who said the NBA had bad revenue and what not. It hurts NBA owners who complained they were losing money. Now, with the salary cap going down, and some owners spending money this Free Agency, it’s a double whammy that many fans are going to be confused about. One reason I think this will be because most fans aren’t aware of how revenue works and another is that the revenue from the Finals will be mentioned as a key reason revenue was lowered. (I heavily doubt this myself. I heavily doubt that Wall going to a big market like DC factors in much either.)

The reality here is that if you thought the NBA was badly hurting for money, or you were one of the owners who was pushing David Stern to say that the NBA is losing money hand over fist, then this is not the best of news. The NBA already lost the big fight with NBA refs after trying to put replacement refs out there. The replacements were so off that everyone, who usually rips the NBA refs, were dying to bring the real one’s back. This is not good news for David Stern who has pushed the NBA apocalypse angle as every other major national media outlet has. Now every person who was predicting doomsday has to explain how the salary cap was raised in the midst of a recession in the US.

I’m going to enjoy this.

Does this effect the Kings?

Of course it does. Any changes to the cap effect EVERY NBA team because all teams are subject to the rules of the cap.

Where this effects the Kings is it means they will have to commit to more money this season than originally anticipated with the 56.1 mill cap. But other than that, there is little to worry about given that the Kings are just under 4 million from that number as of today’s announcement of signing DeMarcus Cousins to his rookie contract.

So does this mean the Kings won’t sign Jon Brockman to a contract? No, they will sign him at some point. I just think they are waiting to see what’s out there before committing to a real number. Hassan Whiteside will be signed at some point (they didn’t take him as a 1 year project), and that’s another point. The Kings have 9 players under contract (Dalembert, Udrih, Garcia, Evans, Cousins, Thompson, Casspi, Landry, Greene) and that doesn’t include Brockman/Whiteside. That’s 11 guys. The Kings are required to have 13 players on the roster.

I think the Kings will take a player like Ime Udoka again and sign him to a minimum salary. Brockman or Udoka might get a bigger salary, or the Kings might not sign either guy to a big deal.

It should be interesting to see what the Kings do here. They have the flexibility to make a trade, sign a player to a decent amount, or something else. As of now? I have no clue as to how this will play out. The Kings have been waiting for the initial fervor to wear off and sign the 3rd & 4th tier of Free Agents this summer. (I think they’ve also been wary of committing major dollars to a player, but that’s only a sense I get.)

As far as what deals could or couldn’t happen? Follow Jason Jones on twitter, or somebody like that. Marty Mac is talking to Geoff Petrie these days too. So, when I know you will know too.


Okay it wasn’t excruciatingly long. Relax.

UPDATE: Via Marc Stein’s twitter, 11 teams paid the luxury tax last year. The Lakers had the highest tax bill at 21 million. (Money well spent.)

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