How does the NFL salary cap work?

Penalties and League Balance in the NFL

A team can face huge penalties if it goes over the cap, or if it tries to dance around the limit. In 2012, the NFL reduced by $46 million the salary caps of the Washington Redskins and the Dallas Cowboys. The Redskins lost $36 million in salary cap space, and the Cowboys took a $10 million hit after "front-loading" contracts in 2010 when there was no salary cap in place [source: Trotter].

The NFL warned teams not to structure their contracts that way. The league said that by dumping salaries into the uncapped year, both Washington and Dallas would have had more money in upcoming seasons to pay for high-impact players and veteran stars. According to the NFL, the two teams "created an unacceptable risk to future competitive balance" [source: Trotter].

So what does the salary cap mean for you? Research shows the cap doesn't affect the price of tickets and merchandise, but it does affect the way a team keeps and acquires players. More important, the cap allows bad and good teams to compete on a level playing field. In theory, and sometimes in practice, a not-so-good team can lure a major talent away from a better team because everyone has the same amount of money to work with. As a result, many experts agree that the salary cap allows sports teams to achieve a competitive balance [source: Neiger].

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