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Forbes reported that the National Basketball Association (NBA) raised the salary cap to $109.1 million for the 2019-20 season (Phillips, 2019), resulting in about a $7 million increase from the previous season. The minimum salary, which is 90 percent of the salary cap, is $98.2 million, and the luxury tax level is $132.6 million.
Before the COVID-19 pandemic, projections for the 2020-21 NBA season were an increase of the salary cap to about $118 million and the luxury tax set at about $143 million (Jones, 2018). However, the pandemic has cost the NBA a significant amount of revenue and it seems that they may continue to lose revenue because of the uncertainty of the pandemic permitting consumer behavior to return to the status quo. Therefore, it is more likely the NBA will lower the salary cap for the 2020-21 season. The salary cap has been decreased just twice ever: $42.5 million to $40.27 million for the 2002-03 season and $58.68 million to $57.7 million for the 2009-10 season (Feldman, 2020). The question is whether the salary cap will be lower than the past season or lower than the projection?
Explain whether you believe the NBA should decide to increase, decrease or maintain the current salary cap and luxury tax levels. Describe the implications you believe will impact the league, teams, and players. You must define and use the following keywords from Chapter 4: Financial and Economic Principles Applied to Sport Management appropriately in your response: salary cap, luxury tax, revenue sharing, and competitive balance.
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