Well, the luxury tax is a threshold -- its not just the pay an extra 1$ for every 1$ over the limit thing. If that were the only issue, then going over the limit by $10, or even $10,000 would be no biggee and teams would feel more free when up in the neighborhood. But the second part of it is that once you cross that threshhold, even if you only cross it by $1 (or $10 etc.) you lose the payouts the teams under the limit get. As I understand it the penalty $s paid by the few teams over the tax limit are then redistributed and divied up amongst all the teams under it. Meaning basically that the Knicks have been funding the league.
But seriously, if the Knicks are $29 million over the tax limit, and have to pay a $29 million dollar luxury tax penalty, then that $29 million is distributed to all of the teams who stayed under the limit. So even if all 29 other teams stayed under the limit, they would still all get $1 million from the Knicks. Which isn;t chump change, and whihc is why I think everybody is so terrified of exceeding that limit for any reason -- millions are on the line.
In any case, given the above, then even a tiny partially guaranteed contract could be just enough to get you back under the limit and get you millions of those Knicks dollars.
