Does the NBA need a hard salary cap?


Tilman Fertitta, owner of Houston Rockets, said something recently that should have fans of every team but the Rockets a little concerned. He basically said that he is okay with the thought of buying a championship. He didn’t say it in those words, of course, but that is essentially what he said.

Fertitta recently talked about how important winning is to him (via USAToday):

“…. I did pay $2.2 billion for this team. I didn’t pay $80 million for it, okay? And I’m not worth $20 billion (his reported wealth is $4.3 billion), but I have no problem paying luxury tax if I truly think that it truly gives me the chance to win the championship next year, okay? But believe it or not, we’re not in the luxury tax today and we truly have a chance to win the championship this year.”

Of course, his team is not within the range of the luxury tax this season. But if he wants to just retain the current roster next season, he will likely have a hefty luxury tax bill to pay for the 2018-19 season. Chris Paul is going to become an unrestricted free agent after this season. Trevor Ariza will be one as well and Clint Capela will become a restricted free agent.

This season the NBA’s salary cap was set at $99.093 million with a luxury tax threshold of $119.266 million. What this means, since the cap is considered ‘soft,’ is that teams can go over the $99 million mark without penalty as long as they stay under the $119 million mark.

Houston has the ninth highest paid roster in the NBA this season at $ 117,806,984. If they are going to retain everyone and possibly bring in another star player, they will absolutely have a luxury tax bill next season.

Why is this a potential issue for every other NBA franchise? Well, because if the Rockets come close to winning it this season or actually do win it, Fertitta will almost certainly pay whatever it takes to keep the roster intact (or upgrade it).

This means the NBA will essentially have two teams (Houston and the Golden State Warriors), or three teams (Cleveland Cavaliers, if they retain LeBron James), that are serious contenders for the NBA Finals for the foreseeable future.

Everyone else will be playing for third or fourth place.

Fans are already living through the Golden State—Cleveland Cavalier Era. Do they really want it to become the Golden State-Houston-Cleveland Era? Do they want the West to be dominated by Golden State and Houston and the East by Cleveland and Boston?

Since the salary cap is only a soft one, it allows owners to go over as much as they want as long as they are okay with paying a tax.  Meaning, teams can essentially buy the NBA Championship as long as the owner is willing to pay the price. This, of course, works under the assumption that the best players are going to be paid what they are worth and what they are able to be paid in accordance with the collective bargaining agreement.

Is this what NBA fans want? Do they want billionaire owners to have the option of paying for enough superstars that their team can’t lose? Or would they rather their team have a shot at picking up a superstar and becoming a contender next season?

As long as the cap is soft, owners will have that option. The only way to take it from them is to eliminate the soft cap and institute a hard cap—right? If the owners can’t offer the players the contracts they want, the players will go where they can get them.

Either that, or they’ll have to take significantly less money to form a super team. It’s one thing to take $27 million when you could be making $30 million. But do we really think there is a player on the planet that would take $10 million when he can earn $30 million somewhere else?

Yeah, he’ll have a better shot at winning a title with a LeBron or Steph on the team with him, but is a championship worth giving up $20 million? To some, it may be, but to most—probably not.

So, in theory, instituting a hard salary cap would restore competitive balance in the NBA. Big Three’s would have to get drafted and then developed. It would become almost impossible to sign three veterans and still afford to fill out the roster.

Golden State couldn’t have Kevin Durant, Steph Curry, Klay Thompson, and Draymond Green. Miami would never have had LeBron James, Dwyane Wade, and Chris Bosh. Super teams would become a thing of the past.

But would it work? Could competitive balance become a real thing? Have teams bought their way to the NBA Finals that often?

No, they haven’t.

In the last six seasons, the team with the highest paid roster in the NBA made it to the Finals just twice – both times it was the Cleveland Cavaliers, last season and in 2015-16. Of the 12 teams in the Finals over those six seasons, six were in the top three in salary (Cleveland in 2016-17, 2015-16, and 2014-15; Golden State Warriors in 2015-16; Miami Heat in 2011-12 through 2012-13).

But three were in the lower half of the league in salary (Golden State last season at 16th; San Antonio Spurs in 2014-15 at 17th and in 2013-14 at 21st). The Oklahoma City Thunder had the 11th highest when they made it to the 2011-12 season Finals.

Perhaps the most important stat worth pointing out is that the eventual champion had the highest salary in the NBA just once (Cleveland in 2015-16).

More teams started spending money last season in an attempt to catch up with the Warriors and Cavaliers. Golden State ended up spending about $5 million more last season than they did in 2015-16. But with so many other teams spending more, their salary ended up being ranked 16th.

Spending money does not make a team a lock to win it all. But they are more likely to make the playoffs. Of the 96 playoff teams over the last six seasons, 25 had team salaries ranked in the top five, 46 inside the top ten and 62 in the top half of the league.

Of the teams that made it to the conference finals over the last six seasons, the average rank for the team salary was 10.75. Values ranged from the top salary in the league to the 29th. Ten of the 24 teams had salaries ranking in the top five. Six ranked in the lower half of the league.

But how many playoff teams had a luxury tax bill at the end of the season? Over the last six seasons there were 29. Of the last 12 teams to play in the Finals, six had a luxury tax bill. But only three Finals winners did.

So, what can we say about the correlation between winning and high salaries in the NBA? Eh– yes, there is a relationship. But history shows that teams are not more likely to win the Finals because they pay their players more.

Will they be more likely to play in the NBA Finals? Yes, but does anyone want to spend a fortune to be the first loser? Not likely.

Back to the original question: does the NBA need a hard salary cap? Since it will not necessarily make a difference, maybe not. High-salaried players don’t necessarily combine to make a championship squad. It takes the right players with the right chemistry and a good coach to put it all together.