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http://sports.espn.go.com/nba/columns/story?columnist=stein_marc&id=1691419
By Marc Stein
ESPN.com
Editor's note: As part of "The Stein Line" every week, ESPN.com senior NBA writer Marc Stein takes you around the league for the latest news and notes in "Coast to Coast."
Dan Rosenbaum, a UNC-Greensboro economics professor who ranks as one of the NBA's foremost luxury-tax authorities, projects a less than one-in-10 chance of a luxury tax being triggered after the 2004-05 season.
Commissioner David Stern tells ESPN.com that he's not even sure a tax will be triggered after this season. "I assume there will be a tax," Stern said, "but I don't know. It's probably more than likely, but it's far from a certainty. I'm working my tail off to see if I can make it go away (this summer) by virtue of increased revenues."
More than one source close to the talks between the league and the players union, meanwhile, insists that there won't even be a luxury-tax mechanism in the next collective bargaining agreement, which would take hold in the 2005-06 season.
What does it all mean? For now it means that the likelihood of an NBA work stoppage this decade is dwindling by the day.
"I think both sides are fully aware of the damage that would be caused by another work stoppage," said Toronto Raptors swingman Michael Curry, president of the Players Association. "I feel pretty safe in saying that there will not be a work stoppage."
The luxury tax, of course, is triggered when player salaries exceed a designated percentage of the league's cumulative basketball-related income. The percentage rises from 55 percent this season to 57 percent next season. And as you've surely heard ad nauseum by now, teams pay one dollar for every dollar they sit over the luxury-tax threshold, and also stand to lose up to $8 to $10 million in rebates from luxury- and escrow-tax money in a tax season. But whenever revenues rise faster than player salaries, as we're seeing, it reduces the likelihood that the tax will kick in.
So ...
1. If the tax is not triggered after this season or next season, that would almost certainly convince teams to start signing and trading more liberally than they have recently. Which would put the players in a much more conciliatory mood at the bargaining table. In that case, the collective bargaining agreement might only be tweaked slightly from the present model.
2. If the tax is triggered after this season or next -- but then destined to be unanimously deleted as part of the new deal -- the players would likely be willing to reduce the length of guaranteed contracts, which is a major desire for the league's owners. In exchange for a world devoid of luxury-tax constraints and escrow payments back to the owners, players around the league sound increasingly willing to drop the length of a maximum contract from six or seven years to three or four. Especially when you figure that many players in the One Player, One Vote union never receive long-term contracts.
"It depends on what they offer," Curry said. "Of course you want to keep contracts as long as you can. But, to date, changing the tax laws is the players' biggest concern."
Either of the aforementioned "if" scenarios bodes well for the sides hammering out a new agreement, even if a new (but less punitive) mechanism is introduced to replace the luxury tax. The notion of a player walkout is highly unlikely unless we see more seasons like 2002-03, after which the luxury tax was triggered for the first time, costing teams millions -- and after which the players, according to figures provided by salary-cap expert Larry Coon, paid some $170 million back to the owners in escrow funds.
By Marc Stein
ESPN.com
Editor's note: As part of "The Stein Line" every week, ESPN.com senior NBA writer Marc Stein takes you around the league for the latest news and notes in "Coast to Coast."
Dan Rosenbaum, a UNC-Greensboro economics professor who ranks as one of the NBA's foremost luxury-tax authorities, projects a less than one-in-10 chance of a luxury tax being triggered after the 2004-05 season.
Commissioner David Stern tells ESPN.com that he's not even sure a tax will be triggered after this season. "I assume there will be a tax," Stern said, "but I don't know. It's probably more than likely, but it's far from a certainty. I'm working my tail off to see if I can make it go away (this summer) by virtue of increased revenues."
More than one source close to the talks between the league and the players union, meanwhile, insists that there won't even be a luxury-tax mechanism in the next collective bargaining agreement, which would take hold in the 2005-06 season.
What does it all mean? For now it means that the likelihood of an NBA work stoppage this decade is dwindling by the day.
"I think both sides are fully aware of the damage that would be caused by another work stoppage," said Toronto Raptors swingman Michael Curry, president of the Players Association. "I feel pretty safe in saying that there will not be a work stoppage."
The luxury tax, of course, is triggered when player salaries exceed a designated percentage of the league's cumulative basketball-related income. The percentage rises from 55 percent this season to 57 percent next season. And as you've surely heard ad nauseum by now, teams pay one dollar for every dollar they sit over the luxury-tax threshold, and also stand to lose up to $8 to $10 million in rebates from luxury- and escrow-tax money in a tax season. But whenever revenues rise faster than player salaries, as we're seeing, it reduces the likelihood that the tax will kick in.
So ...
1. If the tax is not triggered after this season or next season, that would almost certainly convince teams to start signing and trading more liberally than they have recently. Which would put the players in a much more conciliatory mood at the bargaining table. In that case, the collective bargaining agreement might only be tweaked slightly from the present model.
2. If the tax is triggered after this season or next -- but then destined to be unanimously deleted as part of the new deal -- the players would likely be willing to reduce the length of guaranteed contracts, which is a major desire for the league's owners. In exchange for a world devoid of luxury-tax constraints and escrow payments back to the owners, players around the league sound increasingly willing to drop the length of a maximum contract from six or seven years to three or four. Especially when you figure that many players in the One Player, One Vote union never receive long-term contracts.
"It depends on what they offer," Curry said. "Of course you want to keep contracts as long as you can. But, to date, changing the tax laws is the players' biggest concern."
Either of the aforementioned "if" scenarios bodes well for the sides hammering out a new agreement, even if a new (but less punitive) mechanism is introduced to replace the luxury tax. The notion of a player walkout is highly unlikely unless we see more seasons like 2002-03, after which the luxury tax was triggered for the first time, costing teams millions -- and after which the players, according to figures provided by salary-cap expert Larry Coon, paid some $170 million back to the owners in escrow funds.
