What is the NBA's Salary Cap?

How does the NBA’s salary cap work? Teams in the NBA are restricted in their expenditure on players, but why? How does it work? And what can teams spend?

Ryan Baldi explains. Illustrated by Philippe Fenner.

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#SalaryCap #NBA

[mayozay]

This is one area in which american sports is better than football. Salary caps help maintain parity in the league. Unlike in europe where all the world class players are all concentrated in the same 7-10 teams. This is why ucl later stages just have the same teams every season

[Quay_]

I have needed this for so long. THANK YOUU🫶🏽‼️

[SonnyK]

It's funny how the cap was introduced to hamper player movement and encourage teams to build through the draft and yet Golden State pretty much re set the luxury tax record every season for doing just that. Steph, Klay, Dray, Looney, Poole, Wiseman, Baldwin jr, Kuminga and Moody all came via the draft. They won the title last season with a starting five of Steph who was the 6th pick, Klay was the 11th pick, Looney was the 30th pick, Draymond was the 35th pick and Andrew Wiggins who nobody wanted when they traded for him. And their sixth man was Poole who they drafted at 28. So that's two lottery picks and three guys drafted 28 or higher along with a guy everyone thought was a bust to win the title. and you had Gary Payton 2nd who played for their G league team and actually applied for a job in their media department because he thought his career was over. Then a year after he signed and helped them win a title he left because they couldn't re sign him due to luxury tax 🤣I mean when they made the salary rules they probably couldn't have even imagined a scenario better than this. And yet they are the most punished.

[sdeepj]

Along with the salary cap, some North American leagues, notably the NHL has what’s a salary floor. That sets a minimum for teams to spend, ensures owners are actually spending money and not living off the revenue sharing deals. When teams are rebuilding, they’re well under the salary cap and floor, because their roster is filled with inexpensive young players. So to get to the floor, they will take on team’s bad contracts in order to get to the floor. These tend to be players who are de facto retired, but have not declared it officially, so they’re still on the roster and getting paid.

I don’t know about the NBA, but the NHL has what’s called long-term injured reserve (LTIR). When a player is out with an injury for an extended period of time, a team can put them on LTIR. When a player is on LTIR, that player’s salary is not counted against the cap, essentially freeing up cap space. If the player returns for the playoffs, that player’s salary won’t count against the cap, because the cap is not applied for the playoffs. Just Google Nikita Kucharov and 2021 Tampa Bay Lightning to get a better understanding

[oedipascourage]

To-the-point and digestible presentation; thanks!

[WinterFrost-N]

I think a bit more has to be explained on the different types of player contracts and effects of the salary cap, both good and bad.

Sure a cap does encourage a degree of parity in the league so it benefits the owners and fans of each team more, but it works against the players themselves. Many deserved a big bag for their performances in prior seasons but only a select few are able to receive it from their teams because of this. Those who pursued money left their original teams while those who stayed can arguably be considered underpaid (and in some cases overpaid with the new supermax contracts; ie Bradley Beal).

The Larry Bird exception does mitigate this to some extent only for the players drafted by the team. But while it means the amount exceeded by their homegrown players wont count to the luxury tax, everyone else's contracts will still be counted on top of them and the team pays a luxury tax each year. There's no avoiding it if you have 3+ homegrown players who became all stars on max contracts or more, and this snowballs every year. The compounding luxury tax doesn't allow teams to hold on to their homegrown stars for very long.

The good thing about the cap is that it forces teams to get creative with roster construction and not just trade for all the big players, but to also develop their own success from the draft and find hidden gems from other sources like the G League and undraftees. It incentivizes getting one's own house in order and continuing a cycle of excellence over buying success.

However, the Golden State Warriors are a great example of how stretching the limit of the cap and exceptions exposes the weaknesses in the current system, as contrasting as they are. It's league parity vs developing and keeping your own success.

They currently have 1 superstar (supermax contract), 2 all-stars (max contract), 1 rookie max contract (future star) and 3 high tier rookie contracts, all of whom were drafted and/or developed by the team. These alone already pushed them close or above the soft cap. You can say to NOT pay these players big money contracts, but it would likely mean letting them to leave for other teams to get their bag. What team or fanbase would want their homegrown players to leave for a reason like that, and isn't that what the salary cap is trying to disincentivize? Don't the players deserve to be paid for their performance too?

They have 1 more max contract player who they traded for, but the caveat was that NO ONE believed in this guy or wanted him anymore at the time and they turned him into an all-star worth his contract. They also lost another guy who was a core piece of their championship team last season, a guy who EVERYONE passed up on, was never drafted to a team and was stuck in the G League for years, because they did not have his bird rights and could not afford to give him his deserved money after last season.

For much of the championship teams, GSW made their rosters through drafting and developing their main stars, traded for people no one really wanted or signed free agent veterans who were only worth minimum contracts and players who were stuck in the G League waiting for their big break, and turned them all into championship contributors. They never touched any core first-team or rotation players from other teams who were still under contract. They literally built and founded most of their success. And yet they have the highest wage bill and are continually punished for it year after year (next year would be a major hit, the team might be forced to break up because of it).
[For those thinking about Kevin Durant, he chose the team + Steph Curry was underpaid at the time. They did the above for the rest of the squad, and the recent 2022 Championship proves that KD is not the only reason for their dynastic success, especially when there's clear evidence KD alone cannot carry the Brooklyn Nets]


The luxury tax rules need to be reworked, or this fate may someday befall the Boston Celtics and Memphis Grizzlies too. And who would want those well-drafted fun teams to be broken up too?

[HorizonOfHope]

What’s the NBA salary cap? A suggestion.

[Itsnoahscott]

This is super annoying in the 2k games. I didn’t know you could turn it off in the beginning of the season though. I spent too much on LeBron, AD, & Russell Westbrook. Hopefully you can get money back in the off season or just release players because I don’t know how to get money back.

[manzei]

So weird hearing Joe Devine discuss the NBA... Or sound a tad bit serious 😹

[denzela]

Fascinating video. The NBA is definitely ran well, more than the our premier league in England.

[economicsofentertainment]

It will be very interesting to see how things unfold 5-15 years from now when top tier talent which at present usually resides in the USA is attracted to other geographies, i.e Europe because of the investor focus on growing the sport in this region....

[freddymain]

Need a salary cap in the premier league imo

[waqqn]

i didn’t even know tifo had a basketball channel lol

[kevinian]

in other words the nba is trying to get nba owners to stop building super teams

[joezebedee]

Thank god, I thought the Tifo basketball channel was dead, again.

[RudyTheInternetGod]

It's not about the money it's about the skills

[renzrovira]

In the NBA they call teams franchises not clubs...

[etahkevin]

For a highly capitalist country, their sport is highly socialistic, a big contrast to european sport especially football (soccer) which is highly capitalist while most European countries are somewhat socialistic. It shows no idea is good or bad, its the implementation that determines if it is or it isnt

[oslonorway]

You just explained taxation in Scandinavian countries. You earn above a certain amount, it's time to pay up more per increase in level on the income table. Keeps ambitious people from being too ambitious, and causes ingenious earners to become crooks at hiding wealth.

[kevinmendez]

you’re the worst for spoiling The Sopranos, for that reason i will dislike every video you make from now until the end of time