http://www.uncg.edu/bae/people/rosenbaum/luxtax.html
In 2003-04 salaries and benefits must be greater than 61.1% of basketball-related income (BRI) in order for the luxury tax to take effect. In 2004-05, the cut-off percentage of BRI increases to 63.3%, assuming the owners extend the current collective bargaining agreement. Based upon information provided from a variety of public and private sources I make the following predictions on the likelihood of the luxury tax over the next three seasons.
- 70 percent chance of the luxury tax taking effect in 2003-04
- Less than 20 percent chance of the luxury tax taking effect in 2004-05
- Less than 5 percent chance of the luxury tax taking effect in 2005-06 (if the next CBA is like the current CBA using the 2004-05 designated percentage)
Below I provide my reasoning for these conclusions.
This analysis has benefitted from a remarkable amount of help from several NBA executives, and I think it may very well represent the cutting edge of what we know about the luxury tax over the next few years.
In short, I am even more convinced than I was earlier this summer that many teams are grossly overestimating the probability of the luxury tax taking effect in the future. And this means that they are grossly overestimating the costs of being over the luxury tax threshold and grossly underestimating the benefits of being under the luxury tax threshold.
I will leave it to later posts to discuss how that might affect particular teams.
Will the luxury tax take effect in 2003-04, 2004-05, and 2005-06?
Washington Wizards Fans (
Linear Mode
