Earlier quoted context omitted.
Can't it be that defense got better too? Free throw percentage is up since '95 so they aren't just less accurate in general at that distance.
If shooting and defense got better simultaneously, then all other things equal, overall shooting % should have stayed about the same, not gone down. Also, as hardwaregeek mentioned: "And in turn, the game has become less crowded and more spread out, leading to a higher percentage on dunks and layups."
Why? Getting better simultaneously doesn't imply getting better in a way to perfectly equal out.