Via Flickr by George Eastman House
Daniel Schorr: Discovering the object of the game is the object of the game.
Nicolas: I don’t care about the money. I’m pulling back the curtain. I want to meet the wizard.
-The Game (1997)
“The NBA has empircal evidence — from its own economists and other deep thinkers — that bolsters its contention that closing the money gap will close the competition gap. But it has not yet made any of that data public or referenced it specifically to the media. ”
During the battle for basketball supremacy off the court this fall I lost count of how many times I heard commissioner David Stern’s common refrain echoed ceaselessly by a contingent of fans sympathetic and unpretentious when it came to the league’s cause. That popular phrase encompassed six simple words which, taken lacking proper context, had a lasting effect among much of the general public. The powerful parlance reads:
“The last five champions were taxpayers.”
Let’s take a look, including all the playoff teams from the “Last 5,” sorted according to total payroll by year as counted per luxury tax purposes.*
*Accurate NBA salaries are difficult to come by. I cross referenced no less than five different, independent sources while compiling this data for the purpose of obtaining as accurate of results as humanly possible. The league and it’s owners do not release to the public or media any official numbers concerning league-wide yearly salaries. I found ShamSports.com and it’s proprietor Mark Deeks to be most helpful in my research whenever I found myself banging my head against a brick-walled dead end.
â€¢Â Indeed, we see the last five were in fact taxpayers**
â€¢ The average payroll of the “Last 5″ champions was 4.6-highest in the NBA
â€¢ The Dallas Mavericks and Los Angeles Lakers exceeded the luxury tax line every year, the only teams to do so
â€¢ The Mavericks (from 2005 to 2010, six straight years) were a top two taxpayer every year until, ironically, the year they won it all, last
â€¢ The average number of taxpaying teams from the “Last 5″ is 9.4
â€¢ 61% of the playoff teams did not exceed the luxury tax line
â€¢ The Miami Heat and San Antonio Spurs tend to be “hoverers” (more on the Spurs in a minute)
â€¢ The more money the Utah Jazz and Orlando Magic spent the worse they got, record-wise
â€¢ Some, but not all of the consistent playoff teams under the luxury tax line sport star-level elite talents still on rookie contracts
â€¢ 11 of the conference finalists were taxpayers, or 55%
â€¢ 9 of the conference finalists were not taxpayers, or 45%
â€¢ Only once were all the conference finalists taxpayers, and only twice have the majority been
â€¢ Twice non-taxpayers constituted 75% of the conference finals, and once we saw two each of taxpayers and non-taxpayers
**While the Spurs were technically taxpayers it was by the slightest of margins. In the course of hunting down their payroll for the season ending in 2007 I found them listed as everywhere from slightly below to as much as $6 million over the luxury tax line. This infuriated my left brain while perplexing my right brain, the result being a general sense of head-achey confusion and crankiness (which likely led to at least one unwarranted Twitter battle, for which I apologize) until I happened on this, which confirmed that the Spurs had indeed been taxpayers, exceeding the line by a paltry $100K (as the lux tax penalty was dollar-for-dollar we can infer their overage from the amount they were required to pay the league). For that, San Antonio, you now get two asterisked championship trophies. So there. And thanks to Henry for acting as aspirin and saving my insanity for a later date.
At this point in the research I was asked how the “Last 5″ compared to the “First 5″ of the luxury tax era, now fully a decade in. This seemed a brilliant idea when proposed. After all, the bigger the sample size the better, right? I’d figured, now that I had the template down, that I’d just blow right through it. Boy, was I in for a surprise.
For starters, payroll information for the years prior 2006-07 are spotty and suspect at best. If you can find them at all (shout out, HP’s own Curtis Harris). The next thing you’ll find — or more accurately won’t — is that there’s no luxury tax line information available for the year ending in 2005. Why, you ask? I ‘splain.
You see, for the “Last 5″ the way the luxury was calculated and applied changed. “From [the 2005-06 season] onwards, it become (sic) enforced every year, regardless of what happened with the escrow system.” -ShamSports, A Brief History of Luxury Tax
This had a dramatic effect on the perception of parity and competitive balance in the NBA. Reread that last line, for the reality did not change so much as the perception thereof has. That the “Last 5″ were taxpayers became a convenient truth more than an actual one.
Again, I cross referenced everything possible in searching out salaries. When adding in the next two years prior to the above chart the visual effect on the luxury tax line is quite striking. And while I did search out all the numbers, which I will share shortly, there was quite frankly no point in continuing the chart any further back, aside from the fact that I like working here and don’t wish to peeve any of the advertisers with a gargantuan image that would bury them under a pile of Mark Cuban and Jerry Buss.
Immediately we see the champions going back were under the lux tax line. Indeed, while the “Last 5″ were all taxpayers, none of the “First 5″ were, even in the three years the luxury tax line was triggered.
Originally conceived of and designed as a deterrent to unlimited spending in any attempt by teams to “buy” a title, in the first five years of it’s existence the luxury tax was triggered only 60% of the time. The change to a mandatory annual luxury tax tied into player salaries via an introduced escrow system had multiple effects on the league from parity perceptions to revenue sharing rebate checks to changing the way teams approached the lux tax line altogether.
â€¢ None of the first five were taxpayers***
â€¢ The average payroll of the â€œFirst 5â€³ champions was 17th-highest in the NBA
â€¢ The San Antonio Spurs were the lowest payroll to have won a luxury tax era title, at 24th-highest
â€¢ Among the “First 5″ the 2002 Los Angeles Lakers had the highest payroll for a champion, at 12th
â€¢ In the three taxpayer years of the “First 5″ the champions’ payrolls were: 15th, 17th, and 17th-highest, MIA, DET, and SAS
â€¢ A grand total of one team has been successful in “buying” a title in the luxury tax era. Indeed, among the top two taxpayers for every year in the era only one team has been able to do so, assuming one considers that to be the reason they won. To put it another way, becoming a top two spender has guaranteed you only a 5% chance of a title
â€¢ While one of the biggest markets, and a title winner and consistent playoff contender in the luxury tax era, the Detroit Pistons have never paid luxury tax
â€¢ The average overall number of taxpaying teams from the “First 5″ is 9.0. However, among only the three lux tax-triggered years it was 15.0
â€¢ 6 of the conference finalists were taxpayers, or 30%
â€¢ 14 of the conference finalists were not taxpayers, or 70%
â€¢ Of the three taxpayer-triggered years, one saw a majority of conference finalists under the luxury tax line, one over the tax line, and one even with two each. None of the three years saw all four conference finalists either over or under the line
â€¢ The “First 5″ saw two big-market titles, two small-market titles, and one mid-market title. All but the Pistons constituted a mix of veteran and rookie contract-impact players
For the superstars, whether they were genial and quiet like Tim Duncan, or outsized and incorrigable like Shaq, or brash and profane like Kobe Bryant, the message was the same as well: pay me. Duncan was no less ruthless in 2000, when it was time for the Spurs to cough up, as Shaq was a couple of years later — he held San Antonio over a barrel, flirted strongly with the Magic and made Gregg Popovich’s agita kick up like you wouldn’t believe before the Spurs came correct with the loot. When Jerry Buss made it clear he’d like to think about it before extending Shaq, the Diesel went ballistic, cussin’ and snortin’ and talkin’ his way out of town to Miami in a trade — just in time for Buss to bestow $120 million on Bryant, the Lakers’ new franchise player.
***The luxury tax was triggered only three of the five years. For details on why, please refer to the above given link to ShamSports’ luxury tax column
Overall Luxury Tax Era FAQ
â€¢ Half of the 10 Luxury Tax Era champions have been taxpayers and half have not been taxpayers. Smells suspiciously like parity when presented in these sample size terms
â€¢ The average payroll of the LTE champions is 10.80-highest
â€¢ The average number of taxpaying teams in the LTE is 9.20
â€¢ Several teams in the LTE have tried to “buy” titles unsuccessfully, to this point, including the New York Knicks, Portland Trail Blazers, Phoenix Suns, Cleveland Cavaliers, and Orlando Magic
â€¢ 17 of the LTE conference finalists were taxpayers, or 43%
â€¢ 23 of the LTE conference finalists were not taxpayers, or 56%
â€¢ Of the eight luxury tax years 17 conference finalists were taxpayers, or 53%
â€¢ Of the eight luxury tax years 15 conference finalists were not taxpayers, or 47%
No one would be foolish enough to pretend that in order for a team to contend for a title they’ve wouldn’t have to pay for it to some extent, but it’s far from empirical that money or market size automatically equals a title or a shot at one when context is introduced into the conversation. Indeed, in a game where a far fewer number of elite talents can make such a dramatic impact when compared with other sports, the list of factors contributing to a title include not simply spending, but also managing things such as drafting well, developing team chemistry among lineups and in the locker room (which falls under having the proper coaching in place), managing money to maximize talent and fan interest, as well as a fair amount of luck — a single bounce of the ball can mean the difference between a shot and not, at a title.
While it was convenient to point out the “Last 5,” it was in reality nothing more than a public relations ploy during the recent negotiations, one ironically caused by the league’s luxury tax rules changes that ultimately fostered the very environment among owners that they’d been trying to avoid; runaway costs. In the end it came back to bite them in more ways than one — don’t forget that despite the changes in escrow and luxury tax designed to funnel a larger percentage of profits to owners, league revenues were so vast last season that the owners ended up having to pay the players what essentially amounted to bonus checks even as they’d already earned a 57% slice of the BRI pie, which had to have tanned some executive office hides.
The fact of the matter is that in the salary cap era the NBA has brilliantly struck a balance between parity and fan interest leading to an unprecedented era of growth, both at home and globally. While the phrase “competitive balance” strikes a chord that triggers some inner sense of inborn fairness in us all, the reality is that all things are not created equal. When fighting for an ultimate parity, a veritable NBA Utopia, be careful what you wish for…
Once again: seven teams have won more than 80 percent of the league’s championships since 1947. During the most democratic decade in league history, the 1970s, when eight different teams — New York, Milwaukee, the Lakers, Boston, Golden State, Portland, Washington and Seattle — won titles, the public was so disinterested that The Finals had to be shown on tape delay.
If you’d like to learn more about the long-term effects of spending in regards to wins I recommend checking out the works of Andrew Zimbalist, David Berri, and Tom Haberstroh, among others, often compiled and linked nicely at TrueHoop