Dan Rosenbaum

From a variety of sources, here is my best guess at how the disbursement of luxury taxes/escrow will work.

First of all, a couple of definitions.

luxury tax threshold - team salary at which luxury tax kicks in, the sum of luxury tax threshold (multiplied by 29) and total player benefits equals 61.1% of basketball-related income (BRI), my best guess is that this will kick in at about $52 million in 2002-2003

cliff provision threshold - team salary at which teams receive a 0% share of luxury tax disbursements and 70% share of escrow disbursements, the sum of the cliff provision threshold (multiplied by 29) and total player benefits equals 65% of BRI, my best guess is that this will kick in at about $55.1 million in 2002-2003

And now the basic rules.

1. Teams below the luxury tax threshold receive a 100% share of the luxury tax disbursements (about $7.1 million) and a 100% share of the escrow disbursements (about $5.7 million) for a total of about $12.8 million.

2. Teams above the cliff provision threshold receive a 0% share of the luxury tax disbursements and a 70% share of the escrow disbursements (about $4 million) for a total of about $4 million.

3. Teams between the luxury tax threshold and cliff provision threshold receive luxury tax and escrow disbursements equalling 70% share of the escrow disburements (about $4 million) and a fraction of the difference in the disbursements between those teams below the luxury tax threshold (about $12.8 million) and above the cliff provision threshold (about $4 million). This difference in disbursements is about $8.8 million.

4. This fraction is equal to the difference between the cliff provision threshold and team salary divided by the difference between the cliff provision threshold and luxury tax threshold (about $3.1 million). So for a team with a team salary of $53 million, their fraction would be equal to ($55.1-$53)/$3.1 = 0.677, implying that their disbursement would be equal to about $10 million ($4 + 0.677*$8.8).

5. This disbursement scheme leaves some of the luxury tax and escrow undisbursed (approximately $135 million). After the commissioner takes out an undisclosed chunk, the remainder is divided by the 29 teams. Assuming the commissioner takes say $10 million, then the each of 29 teams would receive another disbursement of about $4.3 million.

6. Consequently, teams below the luxury tax threshold will get a total disbursement of about $17.1 million. Teams above the cliff provision will get a total disbursement of about $8.3 million, and teams between the two threshold will get something between these two amounts.

7. Note that this disbursement plan implies that a move that increases team salary from $52 million to $55.1 million results in $3.1 million in luxury taxes being paid and disbursements falling from about $17.1 million to about $8.3 million. Net payroll would rise from about $34.9 million to about $49.9 million, which implies that the marginal tax rate over the range from about $52 million to about $55.1 million is about 380%.

Well, there is more that I can say about this, but I will stop for now.

RetroDreams

Very nice.

Dan Rosenbaum

Here are my guesses at each team's situation. The first number is the team's total salary, the second is the net payment/subsidy from the league. (This column adds up to $166 million, because it includes the escrow disbursement back to the owners.) The last column is net payroll.

(I have assumed in this that the commissioner does not take a chunk of the luxury tax/escrow surplus, so I might be a million or so too high in the last two columns, but remember the owners also will be getting a check of about $10 million due to the Charlotte franchise fee.)

Portland $105.2 -$44.7 $149.9
New York $93.5 -$33.0 $126.5
Dallas $72.2 -$11.7 $83.9
Sacramento $70.1 -$9.6 $79.7
Philadelphia $64.8 -$4.3 $69.1
LA Lakers $62.8 -$2.3 $65.1
Memphis $61.0 -$0.5 $61.5
New Jersey $60.4 $0.1 $60.3
Minnesota $58.5 $2.0 $56.5
Milwaukee $58.0 $2.5 $55.5
Miami $57.4 $3.1 $54.3
Atlanta $55.6 $4.9 $50.7
Toronto $55.1 $5.6 $49.5
Phoenix $54.5 $7.8 $46.7
Indiana $53.3 $12.4 $40.9
Seattle $53.2 $12.8 $40.4
San Antonio $52.8 $14.3 $38.5
Boston $52.4 $15.8 $36.6
Orlando $50.6 $17.3 $33.3
Houston $50.2 $17.3 $32.9
Utah $49.9 $17.3 $32.6
Cleveland $49.6 $17.3 $32.3
Denver $49.1 $17.3 $31.8
Detroit $47.8 $17.3 $30.5
Golden State $47.8 $17.3 $30.5
Washington $46.3 $17.3 $29.0
New Orleans $44.7 $17.3 $27.4
Chicago $44.5 $17.3 $27.2
LA Clippers $42.8 $17.3 $25.5

(If someone is able to line up the columns and put table headings on this to make it easier to read, it would be greatly appreciated.)

Nater

Here you go...

(edit: I don't know why it put all this space here)

Team	Total Salary	Total payment/subsidy	Net Payroll
Portland	$105.20	($44.70)	$149.90
New York	$93.50	($33.00)	$126.50
Dallas	$72.20	($11.70)	$83.90
Sacramento	$70.10	($9.60)	$79.70
Philadelphia	$64.80	($4.30)	$69.10
LA Lakers	$62.80	($2.30)	$65.10
Memphis	$61.00	($0.50)	$61.50
New Jersey	$60.40	$0.10	$60.30
Minnesota	$58.50	$2.00	$56.50
Milwaukee	$58.00	$2.50	$55.50
Miami	$57.40	$3.10	$54.30
Atlanta	$55.60	$4.90	$50.70
Toronto	$55.10	$5.60	$49.50
Phoenix	$54.50	$7.80	$46.70
Indiana	$53.30	$12.40	$40.90
Seattle	$53.20	$12.80	$40.40
San Antonio	$52.80	$14.30	$38.50
Boston	$52.40	$15.80	$36.60
Orlando	$50.60	$17.30	$33.30
Houston	$50.20	$17.30	$32.90
Utah	$49.90	$17.30	$32.60
Cleveland	$49.60	$17.30	$32.30
Denver	$49.10	$17.30	$31.80
Detroit	$47.80	$17.30	$30.50
Golden State	$47.80	$17.30	$30.50
Washington	$46.30	$17.30	$29.00
New Orleans	$44.70	$17.30	$27.40
Chicago	$44.50	$17.30	$27.20
LA Clippers	$42.80	$17.30	$25.50

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BCH

I fixed it. There were a lot of TABs in there that caused the extra space.

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Mr. Predictable

Very nice

I really don't know how to put a table into a post, it would be very helpful if someone could tell me, would help out alot with my trade idea's and mocks.

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vicG

Can you go into more detail about how you derived the disbursement figures?

Thanks!

Dan Rosenbaum

268 views

The best explanation of the luxury tax disbursement rules is on Larry Coon's site.

http://members.cox.net/lmcoon/salarycap.htm#16

I helped Larry write up this section, and practically everything that we know about these disbursement rules are based upon an article written by Frank Hughes last Fall. (To be frank about Frank, I played a role in helping write this article.)

http://www.tribnet.com/sports/basket...-2089198c.html

Patricia Bender's site is good for team salary data. This is not exactly what I use, but it is pretty close. You would need to subtract folks like Luc Longley (who have been taken off the books) from these team salaries.

http://www.dfw.net/~patricia/misc/salaries03.txt

I need to update my disbursements using the latest salaries. My disbursements do not account for folks like Luc Longley coming off the books.

Hey vicG, you get me curious when I see that your only BBoards post is a question about how I came up with these disbursements. What is your interest in all of this?

vicG

Thanks, I'm familiar with Larry's (and I guess yours, if you helped write it) great site.

Thanks again - I'm also very familiar with Patricia's great site. Unfortunately, I don't have other sources like you, so Patricia's is my salary alpha and omega.

Doing the fantasy GM thing enriches my experience as a fan, and to do so requires lots of figures that the NBA, for some reason, doesn't publicize. I was curious if you had found better sources than those commonly available.

I've been to other sites with "Business of the NBA" -type forums, but your post stands out like a sore thumb (in a good way), so I was moved to post.

-inVINCEible-

thanks