Changes to the Salary Cap and Luxury Tax
The NBA’s new Collective Bargaining Agreement (CBA) will likely spell the end of the Golden State Warriors’ dynasty. Among the biggest changes to the league’s financial rules are adjustments to the salary cap and luxury tax, which will make it much more difficult for teams to maintain the type of superstar-laden roster that the Warriors have put together.
Under the old CBA, the salary cap was set at $109 million for the 2019-2020 season, with a luxury tax threshold of $132 million. Teams were allowed to exceed the salary cap in order to re-sign their own players or sign free agents using certain exceptions, but they had to pay a penalty known as the luxury tax. The luxury tax was calculated based on how much a team exceeded the threshold, and the penalties increased for repeat offenders.
Under the new CBA, which was ratified in December of 2020, the salary cap will remain relatively stable for the next several seasons, but the luxury tax threshold will decrease significantly. For the 2020-2021 season, the salary cap will be $109.1 million, with a luxury tax threshold of $132.7 million. However, those numbers will drop to $112.4 million and $136.6 million, respectively, for the 2021-2022 season. This means that teams like the Warriors, who have built their roster around multiple max-contract players, will be hit with much higher luxury tax bills.
Impact on the Warriors’ Roster
The Warriors have already been dealing with the consequences of a bloated payroll, having lost key role players like Andre Iguodala and Shaun Livingston in recent years. With the new luxury tax rules, they will likely be forced to make even more difficult decisions about their roster. Superstars like Steph Curry, Klay Thompson, and Draymond Green are all under contract for at least the next three seasons, but the team will have to get creative with their cap management if they want to keep supporting players like Andrew Wiggins and Kelly Oubre Jr.
One possible solution for the Warriors is to trade away some of their high-priced players in exchange for draft picks or cheaper talent. However, that strategy comes with its own risks, as the team would be sacrificing immediate success for long-term flexibility. Another option is to simply accept the luxury tax penalties and hope that the team’s success on the court justifies the financial hit off it.
The End of an Era?
Regardless of how the Warriors choose to navigate the new CBA rules, it seems clear that their days of dominating the league may be coming to an end. The team has already lost some of its championship core, and with the new luxury tax penalties, it will be much harder to replace those players with comparable talent. Of course, the Warriors still have one of the best starting lineups in the league and plenty of time to make adjustments, so it’s possible that they could continue to compete at a high level for years to come. But with the NBA landscape shifting rapidly, nothing is guaranteed.