fiscal drag

British  

noun

1. economics the process by which, during inflation, rising incomes draw people into higher tax brackets, so that their real incomes may fall; this acts as a restraint on the expansion of the economy

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Example Sentences

It has also made use of "fiscal drag" by freezing the thresholds at which higher tax rates kick in - meaning that as pay goes up, more earnings are taxed at higher rates.

From BBC • Apr. 23, 2026

Frozen thresholds contribute towards what is known as "fiscal drag" and amount to big tax rises – where people can be hauled into paying a tax, or a higher rate of it, courtesy of inflation.

From BBC • Oct. 30, 2024

The effect is known as "fiscal drag" as it drags more people into paying tax in the first place, and others into higher tax bands.

From BBC • May 30, 2024

Also as prices rise, there's pressure to put up wages, then workers get dragged into higher tax brackets - known as fiscal drag - which means the government collects more income tax.

From BBC • Nov. 16, 2023

When income tax brackets do not move with inflation it is known as "fiscal drag".

From BBC • Jun. 30, 2022