While the NBA does not have a true hard cap on salaries, per se, the owners/governors implemented an incentive among each other to stay in a competitive balance.
“If you’re gonna spend a lot more than I do, you’re gonna pay me to let you do it.”
Once a year, they set a limit on salary spending, called the luxury tax line.
- 2021-22 Salary cap: $112,414,000
- 2021-22 Luxury tax line: $136,606,000
Any team that spends over that amount has to pay into a luxury tax ‘slush’ fund that is distributed evenly among all the teams who did not exceed that line.