Fiscal drag

Fiscal drag is the tendency of the proportion of taxation to rise when an economy is growing.

Fiscal drag helps to slow consumer spending and corporate activity, and thus acts as a counterbalance to unrestrained growth.

Fiscal drag is increased when tax thresholds are left unchanged - rather than being increased with inflation.

Such a policy is a way that some governments increase taxes in a relatively stealthy manner.

See also

• Drag
• Fiscal
• Fiscal policy
• Fiscal risk
• Fiscal rule
• Stealth tax
• Supply side policy
• Threshold