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NBA salary cap and luxury tax line rise, delighting Joe Lacob

The cap went up by $11.6 million and the tax threshold by $13.6, which should also increase the Dubs’ title odds

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2022 NBA Finals - Game Six
Joe Lacob and Peter Guber were almost this excited when they learned how much luxury tax they’d be saving this year.
Photo by Elsa/Getty Images

After a few slow years of growth due to the COVID-19 pandemic, the NBA salary cap is going up significantly in 2022-23. And much to the delight of both co-favorites for the 2022-23 title, so is the luxury tax line, meaning that the repeater penalties for the Golden State Warriors won’t be quite as punitive as they feared.

Last year’s salary cap was $112 million, and this year it’s jumping all the way up to $123.6 million dollars. The cap is determined by a percentage of league-wide “basketball-related income” (BRI), an inclusive measure that covers NBA income ranging from broadcast rights to arena signage to even parade revenue, which we wouldn’t assume was a money-making event, but maybe even the Warriors’ parades are light years ahead. The players get 44.74% of BRI, so the cap is 44.74% of total BRI (minus players benefits), divided by 30 to get a per-team number. As a result of the cap going up, so did the luxury tax threshold, going from $136.6 million to $150.2 million.

For the Warriors, who are subject to increased luxury tax due to being “repeaters” - going well over the tax line in three of the last four seasons - this represents huge savings for a tax bill that still figures to be massive. It’s also more than the league expected even three months ago, when the tax line was expected to be at $149 million. Clearly the reason for the increased revenue is more playoff games at the Chase Center, plus sales of “Night Night” and “Ayesha Curry CAN Cook” t-shirts. And because the Warriors couldn’t sweep Dallas or Denver.

It sounds like a joke, but having 12 wildly profitable home playoff games at Chase Center was likely the biggest reason the cap went up over a million dollars more than expected. Looks like the “checkbook championship” got everyone paid - you’re welcome, Brian Windhorst.

For the Warriors, the long playoff run had a double benefit now. It gave them more cash to avoid going further into the tax to retain free agents Kevon Looney and Gary Payton II, but also reduces the amount of tax they’d pay. They’re going to end up paying between $4 and $5 for every dollar they’re over the tax line, so the luxury tax line going up $13.6 million could mean as much as $68 million in savings, and the extra $1.2 million bump in the tax level saves about $6 million, which is 1.5 times what Jordan Poole will make next season.

It’s a huge boon for three of the top teams in DraftKings championship odds. Right now, the Warriors are co-favorites with the Los Angeles Clippers, both sitting at +550, though those odds might improve now that it looks like they have even fewer financial restraints. The Clips have Kawhi Leonard and Paul George on huge deals, and eight players who make ten million or more. Now they’re only $21 million into the luxury tax, making it a lot more likely that they’ll pay to retain free agent Nic Batum. Meanwhile the Brooklyn Nets (+700 to win it all) are $7 million over the tax line with just eight players under contract, two of whom are on rookie deals and two of whom are Ben Simmons are Kyrie Irving, so this cap bump is going to help them add some sorely needed roster depth.

But for the Warriors, this makes it significantly more likely that Kevon Looney comes back (rumors have his deal at about $10 million) and GPII can be kept away from rivals like the Dallas Mavericks. Even retaining Otto Porter Jr. seems more feasible now that his salary would be “extremely onerous” and not “cripplingly expensive.” Overall, it turns out that Andrew Wiggins missing a putback dunk against Denver might have been the secret to keeping Strength In Numbers at full-strength next season.

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