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NBA Salary Cap 101 - the Cap, the Luxury Tax and the Apron

The NBA salary cap system is convoluted and complex. In this first of a series of articles, I hope to simplify and add clarity to these concepts. This first article explains the salary cap, the luxury tax and the apron.
by Jon Hamm Modified: May 9, 2014 at 2:54 pm •  Published: May 9, 2014
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photo - You don't have to be Sam Presti to figure out the NBA salary cap. Just read Jon Hamm's NewsOK Contributor columns. Photo by Jim Beckel, The Oklahoman
You don't have to be Sam Presti to figure out the NBA salary cap. Just read Jon Hamm's NewsOK Contributor columns. Photo by Jim Beckel, The Oklahoman

The NBA’s salary cap figure for the 2013-14 season is $58.679 million. Recent calculations project a salary cap of $63.2 million for the 2014-15 season. The salary cap typically increases each season, though it actually decreased in the 2009-10 season (even the NBA was not immune to the impact of the 2008 global financial crisis).

Luxury Tax

A line in the financial sand is drawn roughly $12 million to $13 million above the salary cap. Teams are subject to a luxury tax if their payroll exceeds it. For the 2013-14 NBA season, the luxury tax line is $71.748 million. The luxury tax line is projected to rise to $77 million next season.

Prior to this season, the Luxury Tax was simple $1 for every $1 over the tax line. Starting this season, the tax rates are much stiffer, starting at $1.50 for every $1 over the tax line and increasing incrementally for every $5 million over the tax line. Starting next season, a team that has been a taxpayer in three out of the previous four seasons faces even higher rates thanks to a concept known as the Repeater Tax. Teams in a “repeat offender” situation would be hit with tax rates starting at $2.50 for every $1 over the luxury tax.

The Brooklyn Nets ran up a luxury tax bill of over $80 million this season. A handful of teams, including the Sonics/Thunder, have never paid luxury tax since the rule’s inception prior to the 2002-03 season. The New York Knicks have paid the most luxury tax in the league, forking over $205 million in tax bills. That has bought the team only five playoff series over the past 11 seasons.

The Apron

In 2011 the NBA introduced another level above the luxury tax line known as the “apron”. This is a line $4 million above the luxury tax line. If a team’s payroll is above this level, they essentially lose access to several salary cap exceptions. If a team is under the apron but uses certain salary cap exceptions, they will be hard-capped at the apron until the following June 30. And by hard-capped, I’m referring to the NFL-style hard cap. If a team is subject to the hard cap, has 10 players under contract and a payroll at the apron, they don’t get exceptions to sign more players.

For example, Brooklyn worked its payroll into and above the apron with the trades and re-signings they’ve made over the past few seasons, but they have not triggered a hard cap. On the other hand, the Minnesota Timberwolves are hard capped for this season. They acquired Kevin Martin from Oklahoma City in a sign-and-trade transaction and used other exceptions that trigger the hard cap. The T’Wolves aren’t in a crunch, however, since their team payroll is about $6 million under the apron.

The rest of the rules surrounding signing, trading and waiving players work around these three concepts. I will elaborate on some of these convoluted rules, and how the Thunder used them to their advantage, in subsequent writings.

by Jon Hamm
NewsOK Contributor
I am a long-time follower of NBA basketball. While I love the sport, it's the behind-the-scenes activity that fascinates me most. For over 20 years I have studied how the NBA's Collective Bargaining Agreement impacts the final product. I was...
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