Skip to Content

Why Does the NBA Have a Salary Cap?

The salary cap is an integral part of the NBA. Without the latter, it is difficult to imagine teams as well as contracts that are inherent to basketball?

Why does the NBA have a salary cap? The NBA sets a salary cap to make sure teams have an equal playing field and no other clubs can purchase all elite players in their rosters. Basically, it helps to create a more competitive atmosphere inside the league. 

RetailerPromotionCodeLink to Store
20% OffBLACKFRIDAYGo to Fanatics
20% offBLFNBA20Go to NBA Store
Free jersey to one Newsletter Subscriber each monthSign up to our NewsletterSign up to our Newsletter

If you are thinking of buying an NBA jersey, then check out the latest offers from the official NBA retailers below.

While salary cap is indeed necessary to keep all teams equal, there are several flaws of this rule. In the following article, we will talk more about these issues, as well as other reasons behind the existence of a salary cap. 

When Did the Salary Cap Appear in the NBA?

The concept of the salary cap was first introduced back in the 40s when the NBA was still in the development process but was abolished one year later. It was the 1984-1985 season when the league actively adopted the rule to equal the playing field for teams in the NBA. After that, the salary cap went through numerous changes but the general characteristics remained the same. From season to season the overall salary cap can increase or decrease slightly depending on the overall situation in the NBA.

Creating a Competitive Environment 

As we have already mentioned in the article, having a salary cap contributes to a more competitive environment among teams. Even the poorest teams can have a squad that is possible to confront the richest teams in the NBA. We can only imagine a situation where one team has the best players in one squad, albeit, the Brooklyn Nets have come closer to this situation several times. 

More Money for Players

Technically if there was no salary cap in the NBA, most players would receive less money in this scenario. Teams try to get as much as possible from the salary cap, giving their best players the largest contracts. In such a situation, where the salary cap is absent, players would be forced to agree to limited salaries. 

Soft Cap – the Problem for the NBA?

Main opponents of the salary cap argue that while it is a good idea to have a plain atmosphere inside the NBA, a soft salary cap creates even more problems. Unlike the hard cap, which exists in the NFL, teams are able to purchase any player even by exceeding the salary cap by paying additional money. However, there are fines set by the NBA but rich teams can pay the luxury tax. The Brooklyn Nets, as well as the Golden State Warriors, managed to purchase star players in their squads by paying the luxury tax and teams with less money are not able to afford the same. However, moving to a hard salary cap could be even more restrictive. 

CBA, Maximum Contracts and Salary Cap

The Collective Bargaining Agreement has many goals, and one is the unification of contracts and salaries. Clubs are not equal in their financial capabilities (and also in the weather, in taxes, in competition for a local fan, in proximity to home, and so on). To avoid a gap in income, a revenue distribution scheme was invented. To avoid a gap in the sports component, salary restrictions were invented.

The maximum contracts are not needed to single out superstars. Their main goal is to make sure that the club (especially from a small market) is not held hostage to one giant contract for several years, as was the case with Minnesota and Garnett, the mega-contract of which was one of the reasons for the 1998 lockout and the introduction of the institution of maximum contracts.

As a result, with proper management work, even the most gigantic contracts do not interfere with building a top team – with the exception of the post-lockout period of 2011-2014, all championship titles were always taken by teams that included the player with the maximum speed or even the highest paid NBA player.

And the most terrible overpayments do not kill the payment system.  The Heat found a way without any problems to throw off Hassan Whiteside’s maximum contract in order to sign Jimmy Butler. This is a team that played in the NBA Finals, and a year and a half ago was considered the club with one of the worst salaries in the league in terms of value for money.

Another goal of maximum contracts is to level the line-ups of teams. The highs are tied to a salary cap and in the first season of the agreement ranges from 25% to 35% of the salary cap, depending on the player’s experience in the NBA and his merits. Thus, it is assumed that in every NBA team, not counting those who have gone into a deep restructuring, there is a player at the maximum contract and in teams of the playoff level there are two at once.

Indeed, there are now 36 contracts in the NBA, which were concluded as the maximum. At the same time, this number does not include Love and Lowry with a salary above 30 million (it is less than their maximum), Derozan and Holiday, whose maximum salary was only in the first season of the contract. 

Will the NBA Abolish the Salary Cap?

It seems unlikely that in the near future we will see any changes regarding the salary cap. While a lot of teams still pay additional money to avoid restrictions by the soft salary cap, the complete absence would only create more problems and we will have a “single-side” NBA with only rich teams having the best squads in the league. 

Sign up to our newsletter, for your chance to win an NBA jersey

Each month we choose one lucky winner, who can spend up to $150 on a jersey of their choice. 

*T&C's apply please see here for detail

You have Successfully Subscribed!