Skip to content

The Lakers have a potential $85 million luxury tax bill looming

Aug 14, 2012, 12:13 PM EST

Los Angeles Lakers' Kobe Bryant and Pau Gasol of Spain walk towards the bench for a time out after losing possession of the ball against the Chicago Bulls during the first half of an NBA basketball game in Los Angeles Reuters

As it stands now (with the roster basically set), the Lakers will have a $99 million payroll — $17 million more than the second most expensive team in the NBA (Brooklyn at $82 million). The Lakers payroll the following season will be in that same ballpark.

I hear the questions from a lot of people outside Los Angeles — didn’t we just have a lockout, didn’t we just miss months of basketball to stop moves like this? We don’t just want a few super teams!

(Actually, ratings say that you do. And NFL-style parity both is impossible in the NBA and probably wouldn’t sell as well anyway, but that’s another discussion for another day.)

The other owners did want to stop this kind of payroll/team building and during the lockout they agreed to stiffer taxes discourage teams from this kind of spending. But those penalties don’t start to kick in until the 2013-14 season — that is when the Lakers will start to pay a stiff price for their payroll.

Cap guru and friend of the site Larry Coon explains it in an email to Henry Abbott at TrueHoop.

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.

By the 2014-15 season the Lakers will be able to control their payroll better because Kobe Bryant, Pau Gasol and Steve Nash come off the books (we will assume Dwight Howard stays at a max deal). For example, Kobe could do what both Tim Duncan and Kevin Garnett just did, taking below their market value (salaries below $10 million) to help out the team.

But the Lakers are all in for the next two seasons with the roster they have.  And with luxury tax and revenue sharing in July 2014 they are going to be writing about a $130 million in checks to the league in addition to their $100 million payroll. They can do some things to lower costs (amnesty Metta World Peace, for one) but if they want to compete for a ring those will be small dents. The big-ticket items, topped by Kobe’s $30 million salary, will remain.

Even with what Jack Nicholson pays for his seats and what Time Warner is paying to broadcast Lakers games on a new regional sports network, the Lakers will not be raking in large profits, if any. And remember, the Lakers are the Buss family business, they do not have billions coming in from other sources so that this is a toy. The Lakers need to be profitable.

But they have run the numbers and decided to chase the rings anyway. Which is what the other owners always feared.

  1. chadinkc30 - Aug 14, 2012 at 9:30 PM

    Kobe has made more money for the Lakers alone to deserve the money plus the tax. I really llove how all the haters say the Lakers are screwed, they don’t really care about taking less profit to try to win titles….what a nightmare for any fan of any team smh

  2. eugenesaxe - Aug 14, 2012 at 9:34 PM

    “the Lakers will not be raking in large profits, if any. ”
    Please. Even making 30mil/year and declining in health, Kobe more than pays his own way.

  3. ndrocks2 - Aug 14, 2012 at 9:44 PM

    Glad Stern got the competitive balance thing settled during the strike…

  4. silveradonguyen - Aug 15, 2012 at 12:08 AM

    Who cares

  5. shockexchange - Aug 15, 2012 at 8:39 AM

    Will the luxury tax matter after the Lakers when multiple chips? This team ought to be illegal. It’s (Nas Voice) “Bye-bye baby” for the rest of the league.

  6. manchestermiracle - Aug 15, 2012 at 1:57 PM

    What’s missing: The enormous amount of money the Laker franchise makes outside of what comes directly from basketball. The business opportunities for the principals in charge when they can woo clients and prospective partners with luxury box tickets to see the star-studded Lakers play.

    The part lost on most, if not all, fans of small- and medium-market teams: Your owner(s) get to share in the millions of dollars that the big-market teams pay in luxury taxes. Your owner(s) put that money into their pockets, not into their teams. And yet you try to make that the fault of the alpha dogs. The exception has (so far) been the Seattle Supersonics/OKC Thunder, and the only difference there (aside from geographic) was a change in ownership. The smart guys make good decisions and reap the benefits, the rest whine.

  7. gjp77 - Aug 15, 2012 at 5:36 PM

    Small Market, Big Market I get tired of hearing it. It’s not so much the market as it is management and the decisions they make. Jerry Buss was a pioneer in the NBA. He saw it as more than a sport. He brought in cheerleaders, signed a TV deal with ON TV (that goes way back). He had teams that not only won but entertained. It’s a business, but it’s also a sport and fans want their team to win. Put a good product on the court and people will pay the ticket prices, you get to the playoffs and you get more revenue. For all the franchises, big or small market, quit your crying. If you can’t run a successful business, get the F@#$ out. There are plenty of other wealthy people that will buy the team, and if they are commited to winning and make good decisions (know how to evaluate talent, get players that compliment each ohter well, know how to negotiate trades etc) then thier team will have success. As for the Nash trade, thank you cry baby Lamar and your little girly feelings that got so hurt. The 9M trade exception we got from Dallas was the instrument that got us Nash. Just another example of how good management makes a difference.

  8. 7milesdown - Aug 15, 2012 at 8:17 PM

    Lakers just started a 20 year 3 BILLION dollar deal with Time Warner. They’ll be fine.

  9. paulhargis53 - Aug 15, 2012 at 9:36 PM

    Tsi: Its not just about the salary cap/ luxury tax!!!! Repeat violators start losing other things like trade exceptions etc. !
    Stern and the other owners wanted these rules in place to prevent another big 3 situation. It’s coming, so you best prepare yourselves.

    I have never seen such a collection of willfully ignorant people as the Laker fanbase in my life. I thought Green Bay Packer fans were bad, but you guys take the trophy.

    All this info has been out there since the lock out ended. I’ve told you this for a month, now this article is here and you guys are STILL refusing to believe or accept it! Just because they have been able to do what they like and pull shit off forever doesn’t mean anything!
    The rules have changed.

    All this info is on the interwebs.
    Get your heads out of your him ends. Bleak days are coming for this franchise. You can’t just let Gasol go, you have to take salaries in return. I can’t wait to see the weeping in a few years. Actually that will be this year when they don’t even reach the finals.

    Watch now, lakerluver, malt, or lounge quill have to reply….

    Seriously, what I have said about the cba is all true. It would do you all a world of good to peruse it.

    • badintent - Aug 18, 2012 at 12:07 AM

      You the man ! LA is full of people who are full of them self. When I lived in SD, people there told me how they hated the LA weekend crowd that came down for the Del Mar races, and drove their cars back and forth in the valet lane to show them off. !The clock is ticking on the Puente Fault Line that runs through downtown LA.. tick, tick ,tick…………………………………..

  10. paulhargis53 - Aug 16, 2012 at 9:13 AM

    It’s not just about the salary cap/ luxury tax! It’s also about the restrictions that will be put into place for teams that are repeat violators! How do you people not see this? Teams are going to be penalized more than monetarily.

    It’s going to restrict them from putting decent players around their all stars.
    You guys keep burying your heads in the sand though.
    When they aren’t allowed to use certain player exceptions and the like, you can scream bloody murder about how unfair it is.
    But the facts have been out there for all of you to see for some time now.
    Lakers are all in with a team that is 3rd or 4th best for the next two years. After that, with the player movement restrictions they will have put on themselves, it will be tough to surround Howard with the needed pieces to be competitive.

    Facts, its hard to dispute them.

    Go ahead mouth breathers, thumb me down and tell me how for the last how many years the Lakers have done this or that. Sorry, the cba has changed and its not going to be good for big spending teams, best get used to it…

  11. teedraper - Aug 16, 2012 at 5:26 PM

    paulhargis53
    ——————–

    We have to trade Gasol?? LOLOLOLOL You ever heard of the amnesty rule you fool? We are talking about facts right? What a babbling fool you are. Bleak days ahead for the Lakers? BWHAHAHAHALOLOLOLOLOL You are suffering from constipation of the mind and diarrhea of the fingertips.

  12. teedraper - Aug 16, 2012 at 5:29 PM

    Helin,

    You’re not a hater….just a JOKE.
    Do you understand how much money the Lakers have now, how much they will have made by the 13-14 season?? It seems this simple fact has missed your concussed hating head yet you’re babbling about turning a profit for one year?? LOLOL…not only will the Lakers turn a profit….they’ll continue to operate in the black as they have for decades. WAKE UP and give this blog to someone that really knows about Laker basketball bc you make me sick.

    • Kurt Helin - Aug 16, 2012 at 5:32 PM

      I think the difference between you and I (well, aside the fact I have NBA contacts) is that I can do math. I do know what the Lakers are making from the new Time Warner deal and I know how much they have to shell out. It’s in the post. They are not as deep in the black as some fans seem to think.

      • nafsrekal007 - Aug 17, 2012 at 5:40 PM

        You can do math but not the Buss math. And I don’t think you know how to make money like the Buss family does. The Buss are about championships, and they did what was necessary to maximize their chances and clearly money is no object when they are in hot pursuit of Dwight and the next NBA championship.
        Someday you will learn it takes small money to make big money.

  13. paulhargis53 - Aug 16, 2012 at 11:13 PM

    Kurt: They just plain out don’t want to get it. They are just blindly homeristic tools. Talking about amestying Gasol? At 33 years old?!

    The willful ignorance of some of the Lakers fans on here dumbfounds me.

    It’s comical also that they think because they are fans they know more than a guy like you.

    I guess when all a person has going for them in their lives is if their sports team does well, I should feel sorry for them. I don’t though.

Leave Comment

You must be logged in to leave a comment. Not a member? Register now!

Featured video

Can Rockets, Grizzlies keep up hot starts?
Top 10 NBA Player Searches
  1. D. Rose (8124)
  2. D. Wade (7189)
  3. K. Durant (6737)
  4. P. Gasol (6218)
  5. R. Westbrook (5569)
  1. D. Howard (5528)
  2. T. Jones (5316)
  3. O. Asik (5155)
  4. D. Lee (4919)
  5. R. Gay (4871)