Phoenix Suns: How the NBA Salary Cap works and impacts the team this year

Insight into the ins and outs of the NBA Salary Cap for Phoenix Suns fans

With the NBA Draft finalized and free agency underway, every team including the Phoenix Suns is currently scrambling to put together the best lineups they can manage.

Fortunately for the NBA and for people who really like math, there are many rules that exist to ensure balanced competition for the league and its teams. While trying to keep up with your team, you often hear about this thing called the NBA salary cap.

My goal is to explain the NBA salary cap and the ways it can be manipulated with “exceptions”, along with a current progress report for the Suns. This will be divided into three sections, each more in-depth than the last.

How is the NBA salary cap determined?

The salary cap is the maximum amount of money allotted to player salaries in a season. This number is the same for every team in the league, however, each team’s situation is different, and each team will utilize the various taxes and exceptions to suit their needs. More on this later.

The dollar amount of the NBA salary cap is dependent on what is known as BRI, or basketball-related income. Simply put, BRI includes just about every way the NBA can create profit. Each year, the BRI is multiplied by 0.4474, and then further divided by 30 (for each team in the NBA). The result is the salary cap. For the 2019-20 season, this number was $109.14 million (and that is the number in 2020-21 as well).

Although the salary cap calculation boils down to one number, it is not a “hard” cap, like we see in the NFL.

A hard cap is a salary spending limit that absolutely can not be exceeded for any reason. In the NBA, the salary cap is “soft”, meaning that the number can be (and quite often is) exceeded via exceptions.

At the same time, there exists a salary floor which is the minimum amount of money allotted to player salaries. This number is calculated as 90 percent of the salary cap, or approximately $98 million in the 2019-20 season. The purpose of the floor is to ensure that teams don’t use salaries as a cost-cutting device and to encourage a competitive balance across the league. If a team happens to fall below the floor, they must simply pay the difference to the players.

So let’s check out the Suns payroll and see how they structured it: Before signing Jevon Carter, Dario Saric, Jalen Smith, and Jae Crowder, the Suns were sitting at a total active payroll of about $94.8 million for next season. This means they had approximately $14.3 million of “room”, along with additional space from “exceptions”, with which to sign these (or other) players. The next section will describe these exceptions and how they apply to the Suns’ situation.

NBA Salary cap tax explanation and exceptions

Here is where things get a little bit nasty: I will introduce the concepts of the tax level, the luxury tax, cap holds, and some popularly used exceptions to build a payroll that seems like it should be way too expensive.

You now know that the NBA salary cap is a soft cap. There is a point at which it becomes more brittle, and that is the tax level. When a team exceeds the tax level ($132.63 million, or the BRI multiplied by 0.5351), it begins to owe a tax back to the league known as the “luxury tax”, and this comes directly out of the owner’s pockets.

The luxury tax is quite severe: teams must pay an increasing penalty (between $1.50 and $4.25 per dollar spent on salary) as they continue past the tax level. Considering most owners are billionaires, this is not supremely effective, but it gets the job done.

What about that space between the salary cap and the tax level? That is $23 million we just skipped over! Well, my friend, this space is for exceptions or free agent signings (not players acquired via trade).

One popular exception is known as the Non-Taxpayer Mid-Level Salary Exception, commonly referred to as MLE. If you read the name slowly enough, it makes more sense: teams above the salary cap that are not paying a luxury tax will be granted an exception to acquire a free agent at a mid-level salary (about $9.3 million). It is by this method that the Suns, who were over the salary cap, acquired Jae Crowder.

Another exception that is quite common is the Qualifying Veteran Free Agent Exception or the Bird Rights. When a player has played for the same team (or been traded) for 3 seasons, he becomes eligible for a maximum extension that can exceed the salary cap. It is by this method that the Suns extended Devin Booker in 2018.

Before Jevon Carter and Dario Saric re-upped their contracts, they were still counting against the Suns’ cap space via “cap holds”. This means that while they were free agents, there is a dollar amount greater than their previous salaries acting as a placeholder in the payroll.

Cap holds exist so that teams can’t sign free agents and then use Bird rights to re-sign players on top of that. If Carter and Saric did not count against the cap while they were free agents, then the Suns would have had an extra $10 million to work with under the salary cap. This means they could have landed another solid player for $10 million, then used their Bird rights for Carter and Saric to re-sign them to excepted deals.

The Suns have likely completed their moves for the foreseeable future: Carter (Early Bird), Saric (Bird), Smith (rookie), and Crowder (MLE) are officially on the payroll, along with three new signees in Damian Jones, E’Twaun Moore, and Langston Galloway, who all agreed to minimum deals.

These minimum deals also count as exceptions, so they can fall into the $23 million gap between the salary cap and the tax level. So, the total payroll comes out to just under $125 million, which is the same number as my estimate for the Suns’ point differential this season.

Further important resources regarding the NBA Salary cap

At this point, I must admit that as fun as this has been, there comes a point where the information is truly overwhelming. However, do not let this deter you! If you seek more information, and there is a lot of it, then you can refer to CBA Breakdown, Spotrac, and CBA Faq.