Jerry Buss

Jerry Buss understood championships were the key to the Lakers’ success. Sadly, his daughter seems to have forgotten that as her unwillingness to pay big luxury taxes threatens to turn the Lakers into second tier competitors.

After two decades with the New York Knicks or Los Angeles Lakers being the NBA’s most valuable franchises, the Golden State Warriors parlayed four titles in last eight years to take over as the league’s most valuable franchise.
Per Forbes, the Golden State Warriors are worth $7.6 billion followed by New York Knicks at $6.6 billion, Los Angeles Lakers at $6.4 billion, and Chicago Bulls at $4.1 billion. Median NBA franchise value is $2.4 billion.

What fueled the Warriors’ rise to the league’s most valuable franchise was it’s commitment to build the best roster money could buy regardless of the astronomical luxury taxes that would accompany this kind of imperative.
Worth just $1.3 billion when they won their first title in 2015 followed by second and third titles in 2017 and 2018, the Warriors proved Dr. Buss formula still works as they quintupled their value over the last eight years.

While there’s hope the mega luxury taxes issue will be somehow resolved in the next CBA, the truth is the money raised from the luxury taxes has now become a valued source of revenue for the rest of the NBA teams.
Eliminating exorbitant luxury taxes could be difficult to do when so many NBA teams either are either willing to pay the luxury tax toll or totally willing to accept their share of the taxes as a bonus revenue sharing.

Unless Jeanie Buss and her family are willing to pay the exorbitant luxury tax toll that’s now required to compete for a championship in today’s NBA, the Los Angeles Lakers will suddenly become second tier competitors.

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How Three Billionaire Team Owners Have Raised the Bar

What’s happened is three teams with billionaire owners — Warriors, Nets, and Clippers — have raised the bar of what it takes to legitimately compete for a championship in today’s NBA to include unlimited luxury taxes.

Last season, the Warriors paid a record $170 million in luxury taxes while the Nets paid $98 million, the Clippers $83 million, the Bucks $54 million, the Lakers $45 million, the Jazz $118 million, and the 76ers $14 million.
This year, Warriors will pay $170 million, Clippers $145 million, Nets $108 million, Bucks at $70 million, Celtics $65 million, Lakers $41 million, Suns $35 million, Mavs $34 million, Nuggets $17 million, and 76ers $2 million.

The problem is the Buss family does not have the resources to compete with mega billionaire owners like the Clippers’ Steve Balmer (Microsoft), the Nets’ Joe Tsai (Alibaba), or the Warriors Joe Lacob (Kleiner-Perkins).
While the six Buss children own 2/3 of the Los Angeles Lakers, they do not have outside sources of income like Balmer, Tsai, or Lacob and must live off the revenue stream they receive from the Lakers operating profits.

Luxury taxes are a major issue. That’s why the front office did not match salaries and keep valuable role player Alex Caruso last season. It’s why the Lakers will not take back more salaries in any trade than they send out.
It’s a position that’s already relegated the Lakers to second tier status as a competitor. They’re willing to spend $40-50 million in luxury taxes but won’t pony up the $100–170 million paid by the Dubs, Nets, and Clippers.

The Lakers must remember championships created their franchise value. If mega luxury taxes are now required to compete for championships, then the Lakers need to accept that as part of the cost of doing business.

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How Lakers Became Second Tier Competitor

The above chart shows ten NBA teams are projected to pay $653 million in luxury taxes for the current season. That’s $65 million in taxes per team which will result in a bonus of $32.5 million for each of the other 20 teams.

Luxury taxes will likely be a major point of contention when it comes to the league and the players negotiating a new Collective Bargaining Agreement. There will be the usual hard push by the league for some form of hard cap.
In the end, it’s going to be hard to give up a system where 10 teams pay $65 million each in luxury taxes, which would then be split between the 20 non-tax paying teams, who would get $32.5 million each in profit sharing.

The ten tax paying teams can easily be broken down into four tiers. Tier 1 is the teams willing to spend over $100 million in luxury taxes and includes the Golden State Warriors, Los Angeles Clippers, and Brooklyn Nets.
Tier 2 is the teams willing to spend $40–100 million in luxury taxes and includes the Milwaukee Bucks, the Boston Celtics, and the Los Angeles Lakers. Tier 3 is for teams willing to spend $0–40 million in luxury taxes.

Right now, the Lakers are not willing to accept trades that raise their total annual salaries because that would also mean increased luxury taxes. L.A paid $45 million last season and is projected to pay $41 million this season. Unless the Lakers are willing to match the luxury taxes that the Warriors, Clippers, and Nets are willing to pay, there is no way they are going to be able to remain competitive being outspent by $60-$130 million per year.

There’s no question that the explosive rise in luxury taxes has changed the competitive landscape in the NBA. As a result, the Lakers’ unwillingness to pay exorbitant luxury taxes has made them second tier competitors.

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How Being Second Tier Competitor Will Affect Lakers

After the long dark struggles due to Covid, the NBA is now on the verge of entering another golden age where team revenues, salary caps, franchise values, and superstar salaries soar to never before imagined highs.

Acquiring and developing young players who have Bird rights is a critical part of intelligent roster construction. The NBA has a ‘soft’ cap, which means teams can go over the cap to re-sign players with Bird rights.
The Golden State Warriors, Los Angeles Clippers, and Brooklyn Nets have spent major sums of money using Bird rights to exceed the salary cap and paying luxury taxes to lock up valuable players to long-term contracts.

The Lakers are already worried that they may not be able to afford to re-sign sophomore sensation Austin Reaves, who’s clearly the third best player on this roster and will probably earn a bigger payday than Alex Caruso.
Make no mistake, re-signing Austin Reaves or trading for and re-signing a player like Myles Turner will not only increase the Lakers’ annual salaries but also increase the luxury taxes due because of the higher salaries.

The Lakers also want to avoid the repeater tax, which doubles the luxury taxes for any team that has been a taxpayer three out of any four years. Lakers will have paid taxes for three straight years after this season.
That means there could be great pressure on the Lakers’ front office from the Buss family to avoid paying taxes this season and next so that the team would not be a repeat offender and have future luxury taxes doubled.

Jerry Buss always understood that you had to spend money to make money. The Lakers need to understand that exorbitant luxury taxes are just the latest toll teams need to pay today to compete for an NBA championship.

Dr. Jerry Buss, who built the Los Angeles Lakers into one of the most successful sports franchises in the world must be rolling over in his grave watching daughter Jeanie forget what made the team worth over $5 billion.

What made Jerry special was he understood pro basketball at its best was simply entertainment and the main key to the business succeeding was to build teams with the star power to attract fans and win championships. The 17 championship banners and 11 retired jerseys of former Laker stars like Magic Johnson, Kareem Abdul-Jabbar, Shaquille O’Neal, and Kobe Bryant hanging in the rafters are why the Lakers are worth over $5 billion.

While Jerry Buss was often a reckless gambler, he always knew winning solves everything in professional sports so he never allowed himself or the Laker to become complacent or less aggressive. Winning was the only goal. Unfortunately, Jeanie seems to have forgotten that lesson as reports now say the Lakers at this time are unwilling to sign free agents or take back contracts in trades longer than the one year left on LeBron’s contract.

Trying to execute a complete offseason rebuilding of the Lakers roster is challenging enough without having to do with your hands tied behind your back and your feet hogtied. Jeanie Buss must see the forest instead of trees. Investing in the present is investing in the future when it comes to LeBron or any other NBA superstar. LeBron is here today in many ways because of how Jeanie treated Kobe, which is exactly how she should treat LeBron.

Unless the Lakers dysfunction is an inspired scam designed to befuddle competitors and create illusive leverage, the Lakers and LeBron James are now at a standoff that’s paralyzed the franchise during a critical offseason. James’ camp seems to be saying show us you can build a championship team and we’ll sign the extension. The Lakers appear to be replying sign the extension and we’ll then go all-in to build a win-now championship roster.

Who’s right and who’s wrong is not as important as the right outcome, which is LeBron James signing the 2-year extension on August 4th and the Lakers then making the long-term sacrifices to win now with LeBron.