ESPN - Woeful Knicks owe more than $45M for luxury tax - NBA (http://sports.espn.go.com/nba/news/story?id=2935728)



Big spending doesn't always pay off. Just ask the New York Knicks. The Knicks, who missed the playoffs last season with a 33-49 mark, were strapped with a $45 million luxury-tax bill Friday. That means New York owes almost $40 million more than the second-highest paying team in the Mavs, who finished with the league's best record.


Team Money Owed 1. Knicks $45,142,002 2. Mavs $7,204,968 3. Nuggets $2,022,418 4. T-Wolves $998,536 5. Spurs $196,082

...The 25 non-tax-paying teams, meanwhile, will each receive 1/30 of the cumulative tax amount, which computes to nearly $1.9 million per team.

Isn't the NBA office in N.Y? They could follow the mayor's example and use some of that tax to improve the administration.

:hoops:

Wow. That's pretty darn sad.

That can happen when your previous regime signs Allan Houston for 100 Mil...lol

Am I correct in assuming Stern & company pocket the undistributed 5/30ths?

The league gets to eat FIRST, but they usually just re-distribute the funds.

They distribute like this

All non tax teams get a 30th share, then the remaining money is distributed to all 30 teams equally.

This is from my fuzzy memory, so it may not be 100%. I would advise checking the Larry Coon's CBA FAQ.

I just checked the CBA FAQ, and I was wrong about the sequence of disbursement.

30th shares to the team under the tax

then the league can skim

then equal 30th shares for all teams.

then the league can skim
Is there a set amount that they skim or just whatever they feel like it at the time?

Man, that would be nice. Bad day at work? Why not take a little extra for yourself.:)

They skim to cover initiatives and projects.

If there isn't a demand, they are under no obligation to take from the pool.

I think the Knicks have actually reduced the amount of luxury tax they have to pay in the last few off-seasons, haven't they? Which just indicates how insane their salary situation has been. A couple of seasons ago, there was the "Allan Houston rule" where you could cut one guy without having to pay luxury tax on him. And the Knicks' cap situation was so awful that they didn't even use it on Houston! They waived Jerome Williams instead, since they were saving money on Houston from insurance because he retired due to injuries.

So I went to the salary cap FAQ (http://members.cox.net/lmcoon/salarycap.htm#16) to see if it had any info on historical levels of luxury tax paid. I had forgotten/didn't quite understand that the current system for luxury tax has only been in place for two years, since the current collective bargaining agreement was signed in the 2005 off-season. Before then, high-spending teams only had to pay the tax if league-wide salaries exceeded a certain level. But now, there's a specific tax level set before each season that each team will have to pay regardless of how much every other team is spending. Here are the amounts paid for the two seasons that the current luxury tax system has been in place:

2005-06
Knicks ($37.2), Mavs ($17.3), Magic ($7.8), Pacers ($4.7), Grizzlies ($3.7), Spurs ($0.9)

2006-07
Knicks ($45.1), Mavs ($7.2), Nuggets ($2.0), T-Wolves ($1.0), Spurs ($0.2)

I just checked the CBA FAQ, and I was wrong about the sequence of disbursement.

30th shares to the team under the tax

then the league can skim

then equal 30th shares for all teams.So the league gives back monies to even the teams paying the tax? Why does that not make sense to me?

Seems logical to me.

If you pay $2 million in tax, and the Knicks pay $60 million in tax, there is a decent chance you will get $800,000 back, and so will the Knicks, which makes your net tax $1.2 and theirs $59.2

There is still an incentive to pay as little tax as possible.

What happened with the Knicks was a historical anomaly. The way the rules are setup now, it will be almost impossible for a team to generate a payroll that is 2 times the luxury tax threshold.

That said, the Knicks are actually getting more talented, and slowly reducing their bloated payroll, so it is hard to fault Zeke who contributed to a big mess but is making the most significant cleanup effort in a decade.

I'm sure it's tough to control yourself when you're handed a blank cheque to sign players. It's a situation where you hate free spenders when you aren't the one spending the money, but once you have the opportunity to, it's hard to pass up.

The best example that I can think of is Glen Sather in hockey. He went from the small market, cash strapped Edmonton Oilers - where he used to sound off on how big market, free spending teams were killing the league - to the free spending, unlimited payroll New York Rangers. What did he do as soon as he got there? Started throwing boat loads of money at mediocre talent.

J.P. Riccardi is another example. When he worked in the Oakland A's organization, it was all about small salaries. When he was hired by the Jays, they told him to cut payroll almost in half - from the $50 million per year range to the $30 million range. After a few years, new owners came on board and now the Jay's payroll is $95 million per season.

Wonder how many of the NY contracts have Isiah's fingerprint on them ??