NBA Is Transforming Into the NFL, Not the NHL: Luxury Tax Revolutionizes Basketball

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The new era of the NBA is here with stricter luxury tax rules. While this year's focus has been on unpredictability, long-term changes will be more rooted in sustainability.

Recent years have offered NBA and NHL playoffs simultaneously and shown completely different tournaments. NBA playoffs have traditionally been about order, with few major upsets and the highest-seeded teams usually advancing deep into the postseason. NHL playoffs often featured teams that barely made the playoffs but then went on Cinderella runs.

The past three years, however, represent a shift for the NBA. Upsets are much more common and have led some to speculate that new rules have turned the NBA into the NHL. That's a bit of a stretch. The team with the best record in the league this season is one win away from an NBA championship.

NHL Comparison Is Misleading

Last year, the team with the best record won the title, and the year before that, the No. 1 seed in the Western Conference captured the championship. The team with the most points in the NHL hasn't won the Stanley Cup since the 2012-13 Chicago Blackhawks. In this season's hockey playoffs, all four top seeds failed to advance out of the second round.

There might be more playoff upsets than people are used to in the NBA's coming years, but it will still be common for top seeds to reach the Finals. Luxury tax restrictions may change how teams are constructed, but the best teams will still win much more than they lose in the playoffs.

NFL as the Proper Analogy

The bigger change will be how long elite teams can stay elite. Contract extension decisions aren't cut and dried anymore, as teams that pay into the second apron of the luxury tax have fewer avenues to improve their rosters. In the coming years, it will be much more difficult to sustain success.

The NHL isn't the North American league that should be used as a comparison point for the NBA's future. Rather, it's the NFL, which features shorter contention cycles and more roster turnover, that the NBA could be emulating in its next era.

While the NBA does not have a hard cap (meaning no team can exceed the cap for any reason) like the NFL, the new second apron rules implemented in 2023 have made it extremely difficult to improve a roster that rises to that salary level.

Second Apron Restrictions

If a team is in the second apron (projected at $207.8 million in 2025-26), it cannot aggregate contracts in a trade, use the taxpayer's mid-level exception, or send out cash in a trade. Teams in the second apron also have their draft pick seven years in the future frozen and cannot trade it.

Basically, it becomes extremely difficult to acquire veteran players for anything other than minimum contracts. The aggregation rule in particular has handcuffed teams in the trade market. Because of these restrictions, several teams that were fine paying luxury taxes before are now treating the second apron as a hard cap.

Celtics as Prime Example

The Boston Celtics are the perfect example of a team that would've likely kept its title core together for a few more years in prior eras but now have to make some tough decisions.

The Celtics were already very likely to trade at least one of Kristaps Porzingis, Jrue Holiday, Jaylen Brown, and Derrick White this offseason even before star guard Jayson Tatum's injury. It's possible two of them will be on new teams next season.

The 2018-19 Warriors had five of the top 64 salaries in the league, including the highest-paid player, but were still able to add DeMarcus Cousins on a taxpayer's mid-level exception deal for $5.3 million. Cousins got injured and didn't work out, but he represented a way expensive teams could infuse their rosters with talent. That deal is no longer available to the Celtics.

Impact on Team Building

Now a team must be confident its roster will need very little outside help for multiple years when it goes into the second apron. Otherwise, the risk is a situation like the Phoenix Suns, which had to pay more than $152 million in luxury taxes for a team that missed the playoffs and now has to trade Durant to have any kind of flexibility moving forward.

It's not as easy as building the backbone of a team and adding on the margins for half a decade anymore. There has to be constant retooling.

The Houston Rockets were the No. 2 playoff seed in the Western Conference before losing in the opening round. They're young, but the clock is already ticking. The Rockets have a team option on Fred VanVleet this offseason for just shy of $45 million.

Exceptions for Superstar Players

With the new landscape of the league, assets will have different values than before. Overpaid players on long-term contracts were always negative assets, but contending teams were willing to take on these players in consolidation trades if they had talent.

That makes the very best players in the game all the more valuable. They've long been the most valuable veteran contracts in the league because individuals are capped at making a certain percentage of the salary cap, meaning the best players still make close to the same as players a tier below.

The Denver Nuggets don't have the ideal cap sheet, as they're overpaying small forward Michael Porter Jr., and guard Jamal Murray hasn't been as consistent as the team hoped due largely to injury issues. Nikola Jokic has never had an All-Star teammate, and the roster isn't very deep as currently constructed.

Yet, the Nuggets pushed the Oklahoma City Thunder to seven games in the Western Conference semifinals and were a true contender this season. Because Jokic is the best player in basketball, even an average team around him has a shot at contending every year.

The Future of the NBA

More than ever before, NBA front offices need to constantly nail decisions on the margins and hope they stack up into something bigger. The Indiana Pacers made bold trades for Tyrese Haliburton and Pascal Siakam but wouldn't have made the NBA Finals without trading up to draft Andrew Nembhard 31st in 2022.

Winning small moves like this aren't easy, but building a championship team isn't supposed to be. If NBA decision-makers want tips, they should call their NFL counterparts, who have been navigating a similar landscape for years.

Thanks to Opta Stats Perform for the data.