Champion Creed
Chapter 388 - 388 155 The Consequences of Luxury Tax Rules

388: 155: The Consequences of Luxury Tax Rules?

Diversity of Personality (Request for Monthly Tickets!) 388: 155: The Consequences of Luxury Tax Rules?

Diversity of Personality (Request for Monthly Tickets!) The Timberwolves were preparing to renew Garnett’s contract ahead of schedule.

Even though the offer Eric Fleisher proposed was an astonishing 6 years for $120 million.

When this news broke, a popular saying in the black community was, “The highest level of robbery is becoming an NBA player.”

Kevin Garnett, a lower-class black man who started working at age 13 and couldn’t get into college due to poor grades, was negotiating a contract worth hundreds of millions before he even turned 20.

This was not just exaggerated in the NBA, but also quite explosive across the entire professional sports world.

Since the league’s salary cap soared, the NBA may not have the highest individual salary ceiling in North American professional sports leagues, but it undoubtedly has the highest average salary.

Anyone with even a hint of star potential was being offered hundreds of millions.

Garnett’s contract, although still at the offer stage, had already set the world on fire.

Some might say that Roger’s contract was for 5 years and $120 million, and he was also very young when he signed.

Compared to Roger, Garnett’s contract doesn’t seem so large.

But Roger had already won a championship when he signed for 5 years and $120 million.

Whereas Garnett hadn’t even played in the playoffs yet.

Keep in mind, 6 years for $120 million was what O’Neal was hoping to get this summer.

But even with two championships under his belt, he ultimately couldn’t get what he wished for.

So, for Garnett, just in his second year, to get an offer like this was quite extraordinary.

Why would the Timberwolves agree to it?

In 1994, the Timberwolves had an average home attendance of only 13,671 people.

After selecting Garnett in ’95, this number quickly rose to 18,171.

This year, as Garnett began to adapt to the rhythm of NBA games and deliver impressive performances, the Target Center had already reached its maximum capacity of 20,444 people for half of its games, season ticket sales were better, and the team garnered more sponsorships.

It proved that Kevin Garnett was someone who could bring tangible profits to a small-market team like the Timberwolves.

And the Timberwolves had to keep such profits going.

They didn’t want a tragedy like “Jordan leaving the Bulls” to happen to them.

The shock of Michael Jordan moving to New York this summer affected not only the fans but also made the owners of various teams anxious.

Michael Jordan’s signing showed for the first time the importance of a large market team.

Yes, Jordan was already dazzling before, but upon arriving in New York, his popularity became even more terrifying, and his commercial income made him extremely wealthy.

The $15 million endorsement deal with Sheraton Hotel was just one example; Jordan’s commercial endorsements after moving to New York were astronomical.

The commercial value of a large market made it increasingly difficult for smaller teams to keep their stars, even with the existence of the “Bird Exception.”

Were the Bulls really that stingy?

They were willing to offer a salary of $25 million a year.

But even so, Jordan left without looking back.

Because in New York, with the blessing of a big market, he could gain much more.

Jordan’s example told everyone that small-market cities like Minneapolis had to offer significantly above the market price to keep their stars.

Otherwise, the wealthier large-market teams could always snatch small-market stars using their market advantage.

Therefore, the Timberwolves had to seriously consider this 6-year, $120 million offer; they absolutely couldn’t risk letting Garnett enter the free agent market.

They couldn’t allow the “Jordan leaving the Bulls” situation to happen in Minneapolis.

Under such pressure, many owners started clamoring for a luxury tax rule to be added to the next collective bargaining agreement, in order to curb the reckless poaching behavior of large-market teams.

Superstars are to a team what a wife is to a husband—If you can’t even keep an eye on your wife, always worrying she’ll run off with the rich guy next door, then how can you do business with peace of mind?

David Stern was seriously considering this proposal to nurture the development of small-market teams.

He had already been sounding out the opinions of the owners on this matter recently.

Rich DeVos, owner of the Magic, held a relatively neutral stance towards it.

But he also had his own concerns about the luxury tax: If the luxury tax were truly enacted in the summer of 1998, he feared he would be the first to be heavily taxed!

By the summer of 1998, Roger’s annual salary would reach a staggering $26.62 million, far exceeding the rise of the salary cap.

Although it was still unclear how much over the salary cap would be taxed, the possibility of the Magic paying the tax was extremely high with Roger’s super contract.

After all, the Magic Team wasn’t just composed of Roger.

If you want to contend for a championship, you can’t just pair Roger with a bunch of cheap rookies, right?

The current salary structure was already causing Rich DeVos to be dissatisfied with the overspending, and if he had to pay luxury tax too, his profit margin would be even slimmer.

A distinction between large and small markets is the huge difference in their maximum market size.

For instance, if a superstar like Roger went to the Knicks, he could bring the team $50 million in pure profit.

But in Orlando, that figure might only be $30 million.

Why?

Because the New York market is larger, the Knicks could secure more sponsorships, and ticket prices could be sold for more.

This has nothing to do with Roger; it’s entirely determined by market size.

And currently, the Orlando Magic’s revenue has almost reached its limit—it’s already difficult to expect significant growth.

If the luxury tax rule was implemented, it would mean the Magic would have to continue increasing investment costs while not being able to earn more money.