The luxury tax discourages unchecked payroll expansion by taxing above‑cap spending—aiming to preserve competitive balance.

It evolved with steeper brackets, repeater penalties, and refined exceptions, forcing teams to balance “now” vs. “flexibility.”

Rather than suppress spending, it steers it: draft and develop, price renewals wisely, and mine value via exceptions and minimums.

It shapes trade/signing boundaries and elevates front‑office decision quality.

Together with the cap, apron/hard‑cap triggers, and exceptions, it frames a salary ecosystem balancing star clusters and parity.