Luxury tax

The luxury tax is a financial penalty line above the salary cap. Teams whose payroll (contracts, dead money, and drafted rookies booked as signed; free-agent holds don't count here) exceeds it pay a tax on the overage, at rates that escalate in brackets the deeper a team goes.

"Repeater" teams, meaning taxpayers in multiple recent seasons, pay substantially higher rates. Tax money is partly redistributed to non-taxpaying teams.

The tax is purely financial; the basketball penalties (lost exceptions, trade restrictions) start at the aprons above it.