The Bucks – after dodging, promising and more dodging – finally paid the luxury tax this year.
Though they didn’t receive the portion of NBA-wide luxury tax distributed to non-taxpaying teams ($3,478,468), the Bucks’ tax payment was relatively low: $794,721.
Well worth it for a championship.
In fact, Milwaukee crossed the luxury-tax line only because Jrue Holiday earned an incentive for winning a title. The Bucks entered the playoffs knowing they’d win a champion or avoid the tax.
This season, Milwaukee faces a much larger luxury-tax liability: approximately $42 million.
Bucks owner Marc Lasry, via Sam Amick and Anthony Slater of The Athletic:Look, (the luxury tax) is a big part. I’m not going to tell you it’s not. I mean, it’s just — if you sign somebody for $5 million, you’re not signing him for $5 (million), you’re signing him for $25 (million), $20 million. You sort of look at that, and you’re trying to figure out, ‘Alright, look, if we’re going to do that, OK, there is a cost to it. Yeah, we want him, but that’s going to cost us $25 (million) or that’ll cost us $35 (million).’ I mean, whatever the numbers are. And I think we’re very focused on that. Look, we’re a small-market team. It’s expensive. I mean, for us, this year we’re going to lose quite a bit of money.
What’s quite a bit?
Um, well think of it this way, we (will) break even before the tax (laughs). … So the tax is real money. (The tax is) what we’re going to lose. You’ll make it up. You’ll make some of it up as you move along in the playoffs, obviously, and that factors in. You’re like, ‘Well look, I know I’m going to lose ‘X (amount of money),’ but if we get to the playoffs, it starts going down.’ But yeah, it’s real money for us. But at the end of the day, the goal is that you want to keep winning a championship, so you’re going to spend the money.
NBA teams claim they lose money more often than they actually lose money under a colloquial definition.
Though costs sometimes outpace revenue, that doesn’t account for skyrocketing franchise valuations. A minor annual loss is well worth owning an asset rapidly appreciating in value.
Team ownership also comes with significant real-world tax benefits. Again, that doesn’t show up in a simple revenue-minus-cost analysis.
Not counting playoff revenue is a new trick. At least Lasry revealed his flawed accounting method with a follow-up question, I guess.
Though it varies by market, the NBA makes about $2 million in gate revenue per game, according to Tom Haberstroh. Milwaukee played 11 home games last postseason.
So, maybe the Bucks will actually lose money next season (though, once again, using just revenue minus cost doesn’t show the full situation). A $42 million luxury-tax payment would be significant.
Credit Milwaukee ownership for signing off on such a high payroll. The Bucks re-signed Bobby Portis with the Non-Bird Exception, signed George Hill with the mid-level exception and traded for Grayson Allen. That depth could make the difference between winning and losing a playoff series.
But Milwaukee could have made all those same moves and re-signed P.J. Tucker, another potentially pivotal player, through Bird Rights.
Re-signing Tucker would have been expensive. If the Bucks gave him the $7 million salary he’s getting from the Heat, Milwaukee’s luxury-tax liability would have increased by about $26 million.
The Bucks decided he wasn’t worth that cost, which is their right. It’s easy to spend other people’s money.
Despite his playoff-revenue chicanery, Lasry at least described the bigger picture accurately while other owners blow smoke: The luxury tax is a “big part” of roster construction.
