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fiscal drag
This term describes a specific economic phenomenon where the nominal increase in wages or inflation pushes a taxpayer's income across a threshold into a higher tax bracket. This results in a higher effective tax rate even if the taxpayer's real purchasing power has not increased, effectively acting as a stealth tax increase.
In political and economic discourse, the term carries a negative connotation, often used by critics to describe government inaction. Because the tax brackets are not adjusted for inflation, the government benefits from increased revenue without the political cost of formally raising tax rates.
Meanings
The process by which inflation or income growth pushes taxpayers into higher tax brackets, thereby increasing the proportion of income paid in tax and reducing consumer spending.
The government was criticized for allowing fiscal drag to effectively raise taxes without passing new legislation.