The billion-dollar rulebook behind NBA parity: seven champions in seven years is no accident

The NBA’s competitive system – from team building to talent distribution – is built around a model designed to maintain balance. And broadly speaking, it works: in the past seven seasons, there have been seven different champions, something that had never happened before in league history. In principle, every team has the same spending capacity on player salaries each season, a figure set by the salary cap. But the cap has intentional loopholes that allow certain maneuvers, theoretically benefiting both teams and players by keeping the market flexible and competitive.

A “soft” cap and the weight of the luxury tax

The NBA operates under a soft cap system, where a key control mechanism is the luxury tax – an economic penalty imposed on teams whose payroll exceeds a specific threshold, known as the tax line, set above the salary cap for that season. This punishment grows steeper the more a team overspends, and in recent years, those figures have become increasingly punitive to preserve the league’s competitive integrity. The idea is to curb excessive spending that could distort parity between franchises.

A system tied to league income

The salary cap is calculated from the league’s Basketball Related Income (BRI) – ticket sales, in-arena concessions and merchandise, sponsorships directly linked to the NBA, and of course, television contracts. These broadcasting deals set the league’s financial pulse, and right now, business has never been better. The latest contracts, coming into effect this season, total $76 billion over eleven years – an unprecedented sum. It follows another major deal from 2016, worth $24 billion over nine years, which triggered massive market inflation and a subsequent correction. To avoid repeating that volatility, the most recent collective bargaining agreement limits annual salary cap increases to a maximum of 10%, with any surplus revenue spread across future seasons to prevent economic shocks.

The 2025–26 salary structure

Once the league’s revenues are secured, roughly half – around 50% according to recent agreements – is allocated to the players. That amount is divided among the NBA’s 30 teams to determine the gross figure that becomes the salary cap after adjustments. For the 2025–26 season, the cap is $154.6 million, up the maximum 10% from last year’s $140.5 million. Projections for 2026–27 suggest a growth of about 7%, as the new wave of TV money is gradually absorbed.

Alongside the $154.6 million salary cap, the luxury tax line is set at $187.8 million, with the more punitive “aprons” – which carry not just financial but also sporting penalties – at $195.9 million (first apron) and $207.8 million (second apron). The salary floor, the minimum teams must spend on player contracts, stands at $139.1 million, or 90% of the cap.

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