If I could change one thing about the NBA, it would be ending maximum contracts.
The NBA collective bargaining agreement between the Players Association and team owners governs player contracts. There are many complicated rules including the maximum amount a player can be paid. Complicating matters further, this maximum amount depends on a number of factors such as seniority and all-star awards.
This means some players, the absolute superstars, cannot be paid market value by their team. They are still paid more than $30 million per season so there is no need to feel sorry for them. But teams that manage to land one of the best players in the league are able to do so at a discount.
The Golden State Warriors pay Stephen Curry and Kevin Durant two of the highest salaries in the league, but both are likely underpaid given they are two of the five best players. If the Warriors were forced to pay market value for Curry and Durant, they would either keep one but not the other or effectively gut the rest of their roster.
Teams also have a maximum amount they can spend on their total team, called the salary cap. While some teams spend more than others, the difference between the rich and poor teams is much smaller than the difference in the MLB*, where there is no salary cap.
I’d like to get rid of the maximum value for individual contracts. Since teams that land a maximum contract player get that players’ production but pay a below-market rate, the team is effectively receiving a subsidy from the rest of the league. If you land a great player, your team is already doing fine. There is no need to subsidize it.
If you’re worried about contracts getting out of hand, I’m fine with keeping the league-wide salary cap in place. That ensures teams are at least somewhat balanced in their total roster and spending power.
Some NBA analysts expect a proposal to remove the maximum limit on contracts would be opposed by the players union. While lifting the restriction would help the small number of superstars, it would likely mean less money paid to the larger pool of average players. As a compromise, I would propose a tax and spend policy within the union.
As an example, the Lakers could pay LeBron James market value ($100 million?) and the union could have policies dictating that an overwhelming majority of James’ pay above $35 million (roughly the maximum contract right now) gets redistributed throughout the union. This may seem like the same outcome as the status quo. The difference is the Lakers would have less money available to spend on other superstars.
Keeping team salary caps while lifting the ceiling on individual contracts would help competitive balance by using market forces. What’s not to like?
(*) Technically the MLB has a “luxury tax” but it has mainly been limited to the Yankees, Dodgers, and Red Sox. The NBA has a luxury tax which is incurred more frequently.