Salary cap

In sports, a salary cap is a limit on the amount of money a team can spend on player salaries, either as a per-player limit or a total limit for the team's roster (or both). Several sports leagues have made salary caps mandatory, both as a method of keeping overall costs down, and in order to balance the league so a wealthy team cannot become dominant simply by buying all the top players. Salary caps are often the major issue in negotiations between management and players' unions.

Salary cap in the NBA

Similarly to the NFL, the NBA's salary cap is calculated as a percentage of the league's revenues. As of 2004-2005 season, the number was approximately $46 million (U.S.) per team. The NBA's salary cap is a so-called "soft cap", meaning that teams are allowed to exceed the cap number in order to retain the rights to a player who has already been on the team. This provision is known as the Larry Bird exception, named after the former Boston Celtics great who was retained by that team until his retirement under the provisions of this rule. The provision tends to result in most teams being over the cap at any given time. There is no official penalty for being over the cap, but teams over the limit are prohibited from signing free agents for more than the league minimum, with only a few exceptions. There are teams such as the New York Knicks who have payrolls at double the cap saddled with overpaid and underperforming players, and at the same time left unable to sign free agents; the result is that the Knicks are trapped into a cycle of mediocrity.

Related Topics:
Larry Bird - Boston Celtics - New York Knicks

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

The NBA also has a luxury tax system which is triggered if average team payroll exceeds a certain number higher than the cap. In this case, the teams with payrolls exceeding a certain threshold have to pay a tax to league which is divided among the teams with lower payrolls. Unfortunately, this is also flawed; as long as the league average doesn't hit the threshold no teams in violation will have to pay the tax, but if the league does exceed the threshold those teams in violation will get slapped with a large tax burden.

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

The NBA has recently also implemented a maximum salary for individual players. This was done following a dramatic increase in player salaries, in spite of the salary cap, in the mid-1990s. Under the collective bargaining agreement, a player's maximum possible salary increases along with his time of service in the league. For a player of four years' experience, the salary threshold begins at approximately $9 million, with annual increases of up to 20% possible beyond that. For players of greater experience, the salary limit is higher - but the 20% limit on annual increases remains the same.

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

In the NBA, the salary cap has not had quite the effect of breaking up championship teams that it has had in the NFL. Repeat championship winners have been far more likely to occur in the NBA than in the NFL in the salary cap era. Of course, the converse effect of this has been to make the overall rate of salaries paid and hence the expense to operate a team rise more rapidly in the NBA than in the NFL. Average NBA salary is $4.9 million (U.S.), the highest of any major North American sports league. The collective bargaining agreement came up for agreement in 2005 but NBA Commissioner David Stern decided to play it safe and there was no attempt to implement a hard cap or any other major changes, to the dismay of many commentators who felt that changes were long overdue and that the NBA could take advantage of the NHL's momentum.

~ ~ ~ ~ ~ ~ ~ ~ ~ ~