The NBA luxury tax is in place to punish teams that go over the salary cap and help to make the playing field much more level. While it has been in place for many years, many NBA fans still don’t know how it works.
Who receives the NBA luxury tax? The total luxury tax that is collected by the NBA is then distributed evenly between the other teams who did not pay any luxury tax in an effort to level the field financially.
There are big differences between European and American sports and one of the key differences is the salary cap. The salary cap has been enforced in the NBA since the 1984-85 season, to ensure that the playing field is level and it is not just the richest teams winning every year.
One of the main differences between the NBA salary cap and other leagues is that the NBA cap is not a hard cap. Teams are allowed to go over the given salary cap, but they do pay a penalty if they go over the cap.
The penalty that teams pay when they go over the salary cap is called luxury tax. It is a penalty tax that teams have to pay depending on how much they go over the salary cap. The amount that teams pay tends to vary as the penalty is applied depending on the value that you go over the salary cap.
Before the 2013-14 season, NBA teams paid a dollar luxury tax for every dollar that they were over the salary cap. At the moment, teams will pay between $1.50 and $4.75 per dollar that they go over the salary cap. If we have a look at the team who owe the most luxury cap, we can see they pay well over $4 for every dollar that they are over the cap.
| NBA Luxury Tax Payments | |||
| $s over Threshold | Amount per $ | Increment Max | Cumulative $s |
| $0-5million | $1.50 | $7,500,000 | $7,500,000 |
| $5-10million | $1.75 | $8,750,000 | $16,250,000 |
| $10-15million | $2.50 | $12,500,000 | $28,750,000 |
| $15-20million | $3.25 | $16,250,000 | $45,000,000 |
| $20-25million* | $3.75 | $18,750,000 | $63,750,000 |
| $25-30million | $4.25 | $21,250,000 | $85,000,000 |
| $30-35million | $4.75 | $23,750,000 | $108,750,000 |
| $35-40million | $5.25 | $26,250,000 | $135,000,000 |
| *After $25m it increase 50c for every additional $5m over |
The reigning champion Golden State Warriors are the team who owe the most on luxury tax, with a whopping $170,331,206 of luxury tax due thanks to the Warriors going $39 million over the threshold. They are set to go over by even more this year as they are in the Repeater bracket. The repeater tax is triggered if a team is in the Luxury Tax for 3 of the last 4 years. It can get expensive. Similar to the standard Luxury Tax table above, the below table shows the amounts you pay per $1 if you are in the repeater tax.
| NBA Repeater Tax Payments | |||
| $s over Threshold | Amount per $ | Increment Max | Cumulative $s |
| $0-5million | $2.50 | $12,500,000 | $12,500,000 |
| $5-10million | $2.75 | $13,750,000 | $26,250,000 |
| $10-15million | $3.50 | $17,500,000 | $43,750,000 |
| $15-20million | $4.25 | $21,250,000 | $65,000,000 |
| $20-25million* | $4.75 | $23,750,000 | $88,750,000 |
| $25-30million | $5.25 | $26,250,000 | $115,000,000 |
| $30-35million | $5.75 | $28,750,000 | $143,750,000 |
| $35-40million | $6.25 | $31,250,000 | $175,000,000 |
| *After $25m it increase 50c for every additional $5m over |
At the moment there are seven teams who are paying the luxury tax. This penalty is collected by the NBA and then distributed between the teams who are not paying the luxury tax. The NBA does this so that the financial playing field is level.
| Team | Payroll | Luxury Tax | Total Spent |
| Golden State Warriors | $175,858,992 | $170,331,206 | $346,190,198 |
| Brooklyn Nets | $169,286,329 | $97,731,568 | $267,017,897 |
| Los Angeles Clippers | $166,162,398 | $83,114,696 | $249,277,094 |
| Milwaukee Bucks | $160,245,385 | $58,647,698 | $218,893,083 |
| Los Angeles Lakers | $156,636,217 | $45,113,318 | $201,749,535 |
| Utah Jazz | $147,743,929 | $19,094,825 | $166,838,754 |
| Philadelphia 76ers | $145,249,786 | $13,876,627 | $159,126,413 |
If you have a team that is able to pay over the salary cap then they will have an advantage over teams whose owners are not as rich and can’t pay over the salary cap. This would defeat the purpose of a cap if this was the case and it is why there is a penalty for going over the cap.
By distributing the luxury tax amongst the rest of the teams, that advantage is shared amongst all of the NBA so that the team over the cap is not getting an unfair advantage over everyone else.
Check out our article on the Warriors 2022 title team and their massive salary bill…
Who pays the most luxury tax in the NBA?
The NBA luxury tax is pretty confusing for a lot of fans. It is the Golden State Warriors who have paid the most in luxury tax in the 2021-22 season. There are estimates that the Warriors paid around $170 million in luxury tax in the 2021-22 NBA season due to being $39 million over the luxury cap threshold.
It is not surprising then to see the Warriors winning the championship as paying the most luxury tax also means the Warriors have the highest total salary figure. So while they gain an advantage from the increased total salary, their owner Joe Lacob has recently come out and criticised the luxury tax rule.
He said that the luxury tax is a “very unfair system” and talked about his Golden State Warriors being built on players they drafted, instead of signing in free agency. The luxury tax does have its critics. The Warriors have to pay more times the amount they are over the salary cap in luxury tax which is a huge amount.
If we look back at the season just gone, there were seven teams estimated to be paying the luxury tax. The second highest luxury tax bill was to the Brooklyn Nets whose bill was estimated to be around $97.7 million, mainly down to the salaries of Kevin Durant, Kyrie Irving and Ben Simmons.
The other teams who were paying the luxury tax in the last season were the Los Angeles Clippers, Milwaukee Bucks, Los Angeles Lakers, Utah Jazz and the Philadelphia 76ers. These are all teams who have superstars on the roster and had to go into the luxury tax in order to build a good roster around their superstars.
Some of the big moves in the offseason have changed the landscape of the salary cap and the projections on luxury tax into next year are quite different. Despite paying almost double the amount of luxury tax as any other team this season, the Golden State Warriors are not the team expected to pay the most luxury tax in the 2022-23 season.
Mainly down to some big offseason moves, the Los Angeles Clippers are the team expected to pay the most luxury tax in 2022-23. Their bill is estimated to be around $144.7 million, around $3.6 million more than the estimate for the Warriors. It is because the Clippers are now the team with the biggest payroll, having added John Wall and re-signed Nicholas Batum to a multi-year contract.
There will also now be more teams paying the luxury tax in the 2022-23 season, with a total of 12 teams estimated to be paying the luxury tax this season. The Utah Jazz are the only team who are not paying the luxury tax having done so last season. This leaves six new teams who are: Boston Celtics, Phoenix Suns, Dallas Mavericks, Portland Trail Blazers, Denver Nuggets and the Atlanta Hawks.