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It seems to me that if an NBA team has an annual salary cap of, say, 100 million, set by league rules, then the team acquires players until they can spend all 100 million for the year -- some teams go over the cap and pay a penalty tax for doing so.

Why does a team spend all 100 million, particularly if it's a team that's widely considered to not contend for the championship?

Why not spend, say, 80 million, and save 20 million, if the championship title is not in the cards for a team anyway?

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    A salary cap is not a budget. It's an artificial limit above which spending will be penalised directly by the organiser. – Nij Jun 21 at 3:57
  • If they get 100 million per year, what is the point of saving it? It will just replenish next year. – Ginge Jun 21 at 19:44
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Short answer - because they have to.

Long Answer

The NBA runs a soft cap, sort of like baseball. Meaning if this year's cap is 100 million teams can go over the cap within guidelines. There are just too many guidelines to cover in an answer.

HOWEVER, unlike baseball the NBA took a hard-nosed approach to spending in the last CBA (collective bargaining agreement). NBA team must spend at least 90% of the cap space available. If they do not the excess money to make 90% will be distributed amongst current team members (player's union divides money).

So if the Chicago Bulls were only at 70% of the cap of 100 million they don't just save 30 million. They must set up a fund of 20 million that will be split among the current season Bull's players. This has and does happen.

But... based on there also being a luxury tax for big spenders it is not normal for a team that is under the minimum to make it through the season staying under. Often a team that is over will trade away assets so that they get under a threshold to a team under the minimum. The team that takes on the player may get draft picks and cash to pay the player. Even during the tanking years of the 76'ers they were usually at the minimum or close and was actually a strategy to take other team's bad contracts to accumulate draft picks.

Also based on another answer I will add that NBA players and free agents have not held it against teams for being cap frugal. That is actually a good thing and makes it more attractive for a mid-tier star to come because that player knows they have a chance at a better surrounding cast. The last thing a mid-tier star wants is to join a team that has been maxed out for 10 years (see Knicks for like 20 years in a row until this off-season).

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First of all, the 100 million is only around half the team's budget. The league and the players agreed on using only 51% of total revenue for player's salaries. It is rational to spend all of it firstly because there is no other way to spend it. Secondly, you would make yourself unattractive for potential Free Agents. The side-effect is, that decent players who are far from being superstars can make a fortune in mediocre teams. Current examples are Otto Porter for the Bulls or Mike Conley in Memphis.

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    To add context to Mike Conley's contract: First, he received one of the first contracts after a salary cap spike. Next, he was only able to earn as much because he was considered a 10-year veteran at the time of this contract. Furthermore, other mediocre players received such contracts as a result of the salary cap spike, such as Luol Deng and Timofey Mozgov. His contract was a byproduct of timing rather than production, and supports your point that there is no choice but to spend the salary cap. – user16112 Jun 24 at 12:31
  • During the 2018-2019 NBA season, only the Dallas Mavericks spent less than the salary cap. – user16112 Jun 24 at 12:32

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