The NBA has issued new projections for the 2014-15 and 2015-16 salary cap and luxury tax thresholds. All 30 teams were informed this week via league memorandum that the 2014-15 cap and tax threshold are now projected to be $63.2 million and $77.0 million, respectively. The numbers for 2015-16 are now projected to be $66.5 million and $81.0 million, respectively.
It should be noted that these are non-binding forecasts that have been circulated more than months before the official salary cap and luxury-tax threshold for the 2014-15 season are announced in early July, following a league-wide audit (that’s what July Moratorium is for). As part of the audit, accountants jointly appointed by the NBA and the player’s association finalize the total revenue haul during the past season and, on that basis, project the revenues for the upcoming year.
They then take 44.74% of that projected amount, subtract projected benefits, and divide by 30 (the number of teams in the league) to get the salary cap for the season ahead. Adjustments are then made to the cap if players received way too much (or way too little) in salaries and benefits for the then prior season relative to the finalized revenue figure; this serves as a mechanism to maintain the integrity of the agreed-to revenue spit between owners and players. The luxury tax uses a similar formula, but is based on 53.51% of projected revenues.
The salary cap and luxury tax values for the current season are $58.679 million and $71.748 million, respectively, which means the new cap projection for next season represents a 7.75% increase over this season. This is a pretty big jump — the league’s baseline assumption for year-to-year increases is 4.5%. Read more…