The Lakers May Face A Luxury Tax Payment Of $115 Million In 2014-2015

This according to ESPN’s Henry Abbott and luxury tax guru Larry Coon. The latest collective bargaining agreement was designed to keep teams under the salary cap – while going over is permitted under the “soft” cap rules, mostly to re-sign superstars and keep teams together for years, ultimately any team with the money can go well overboard. And that’s what the Lakers have done this season.

Here are some numbers to swallow for 2012-2013.

Dwight Howard: $19,261,200
Kobe Bryant: $27,849,149
Pau Gasol: $19,000,000
Steve Nash: 8,900,000
Metta World Peace: $7,258,960

And that’s just the starting five. Yikes.

For a further breakdown, here’s Larry Coon, via Henry Abbott of ESPN:

“The Lakers will have a tax bill of around $30 million next July, and in retrospect, will view this season as their salad days — it’s the last one where the tax rate is dollar-for-dollar. Starting in 2013-14 the new “incremental” tax takes over, where being $30 million above the tax line will mean paying a whopping $85 million tax bill.

And it gets worse. Starting in 2014-15 teams will pay an even higher rate for being repeat offenders — defined as paying tax in at least three of the four previous seasons. A team $30 million over the tax line will pay — brace yourself — an additional $115 million in luxury tax.

After adding up their payroll, luxury tax bill and revenue sharing contribution (projected to be $49.4 million in 2013-14), even the Lakers have to stop to consider whether this simply can be written off as the cost of doing business — and that’s the future if they’re paying players with salaries like Bryant, Howard, Gasol and Nash.”

Of course this is all contingent upon Dwight Howard staying a Laker, but at this point it seems more and more likely. (He’s only “testing” the free agent market because he stands to make a ton more money if he does as opposed to re-signing during next season.) But the real kicker is that, in 2013-2014 alone, Coon estimates that the Lakers will lose an estimated $240 million due to revenue sharing, salaries and luxury tax – $115 million of which is because the Lakers are repeat luxury tax offenders (over multiple seasons), and therefore will pay a much steeper price than the one-to-one cost.

So now, the bigger question is: is this all fair?

That’s an interesting question that can follow two paths. On the one hand, the Lakers are just playing the game. They have built one of the most popular franchises in the league, and therefore have the money to spend to afford the luxury tax (barely). So kudos to them for their willingness to shell out potentially hundreds of millions to win championships.

But then we have to look at it from the CBA’s intentions. Simply put, it’s to limit owner spending. Maybe it’s to keep owners from tying their own noose, or maybe it really is for competitive balance. In either case, teams simply aren’t meant to go over the salary cap. And this is the core problem with the last few CBAs: balancing a teams’ rights to keep its players with players’ rights to earn more money with more experience, all the while maintaining competitive balance.

Look at Oklahoma City, who next season will essentially have to choose between James Harden and Serge Ibaka, both of whom will be restricted free agents. Does Sam Presti and Oklahoma City deserve to be punished for drafting well? Really, the best type of players are those who develop late, after restricted free agency, so teams can receive maximum value.

In truth, the NBA has probably found it’s best middle ground. Competitive balance is ultimately beneficial for the league as a whole, drumming up interest and keeping small market teams in the conversation. San Antonio, Detroit and Oklahoma City all paved the way, showing that small markets can win frugally. Still, there might a better alternative out there, one that stops the Lakers from always reloading instead of rebuilding. What it is, that’s difficult to say.

The NBA probably can’t shift to a hard cap, not only because the players would never go for it in CBA discussions, but simply because the NBA is about dynasties. It’s about chemistry, emotion and feel. If there’s anything the League has shown us over its history, it’s that talent doesn’t always win. The 2011 Mavericks were just the latest example. But at this point it seems the Lakers are simply trying to buy championships. But if they’re willing to open their wallet, more power to them.

Is it fair that the Lakers can pay more money for players than any other team?

Follow Dylan on Twitter at @DylanTMurphy.

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