Dwight Howard was the most coveted free agent in 2013. Many teams would clear their payroll just to have a chance to pick up a necessary piece like him to form a championship team. But why did the Lakers let him go? The start of 2012-2013 NBA season looked promising for the Lakers with the Superman in the lineup until they played their 1st game. The team did not have chemistry. Or was it the coach’s fault? And so LA fired Mike Brown only 5 games into the season. Blame it to injuries sustained by key players throughout the season. Then there was Kobe’s assessment that Howard is not playing hard enough (not playing with “high intensity”). Add to the equation that coach D’Antoni’s style doesn’t sync with Howard’s playing style. A little bit of the aforementioned reasons account for the Lakers- Howard break up but the biggest reason is money, money and money. Hold that thought, isn’t it that the LA Lakers are ranked by Forbes Magazine as the number 2 most valuable NBA team behind NY Knicks? They are a billion dollar franchise! What’s $20-25 million more for DH, right? Knowing the Lakers organization, they could have easily signed Howard for much more but the new luxury tax penalties made it a business decision to let him go. Kobe +Gasol+Howard =$70 million in Superstar salaries. The 2013-2014 NBA luxury tax cap is set at $71.748 million. That means they have a little less than $2 million to stay below the that cap. But not the Lakers! Last season alone they paid the league more than paid Kobe in salary. No monetary reason can prevent them from keeping that west coast hold to dynasty, right? Not this coming season.
The NBA has allowed teams to build a dynasty with its soft salary cap. Unlike NFL which implements a hard cap, a professional hoops team can get away with at least 3 superstars if they are willing to spend millions of dollars in luxury tax penalties through a clause called the Larry Bird Exception. The Bird exception allows teams to resign their own players, a free agent, for much more money even if it exceeds the salary cap. The player should be on the team for at least 3 years to qualify for this right. If the player is a veteran, an Early Bird’s Right is also implemented, he can qualify for the same right even if the player has been on the team for only 2 years. There are other exemption clauses but this is the biggest reason why teams can go beyond the Salary Cap. The luxury tax penalty before the upcoming 2013-2014 season was dollar to a dollar. The most hardly hit in 2012-2013 season were the LA Lakers. They had a payroll of $100 M, $30M over the luxury tax threshold. That means they paid the league $30 M in luxury taxes.
The 2013-2014 NBA season will implement a much stiffer, way more expensive penalty for teams going above the luxury threshold. This is how it looks like:
Amount over tax threshold
Standard tax per excess dollar
$5 million or less $1.50
$5 million to $10 million $1.75
$10 million to $15 million $2.50
$15 million to $20 million $3.25
Over $20 million $3.25 + $0.50 per
Repeat offender tax per excess dollar
$5 million or less $2.50
$5 million to $10 million $2.75
$10 million to $15 million $3.50
$15 million to $20 million $4.25
Repeat offender -over $20 million will pay $5 million$4.25 + $0.50 per $5 million increments)
The Lakers, if they were still $30 million over the luxury tax threshold, would have paid $3.75 for every dollar they have exceeded the tax cap. That’s a whopping $112 M, the penalties would have exceeded their own payroll of $100M. But wait, there’s more, that would make them repeat offenders, so at $30 million over the luxury tax cap, they would have been assessed $5.25 for every $1.00 over the cap. How about $ 157.5 million in tax penalties? You can run 2 or 3 more teams with that amount of money!
So, for NBA fans who thought it was team chemistry, Kobe, Howard himself or even coach Mike D’Antoni as the reason for not resigning Dwight Howard, look at the numbers and think again.