Bracket indexation is a change in the upper and lower limits of any particular taxation bracket in line with an index of inflation. This is needed in times of inflation to avoid fiscal drag (the tax system collecting unduly large amounts of tax). Research Bracket Indexation
Fiscal drag is a restraint on the expansion of an economy as a consequence of government taxation policy. In a progressive tax system, a rise in inflation will cause wage earners to pay a higher proportion of their income in tax, even though their real wages are unchanged; this is nominal fiscal drag. Real fiscal drag occurs when all taxpayers pay a higher proportion of their income in taxation, as a result of rising real wages. In these circumstances there is a rise in government tax revenues as a proportion of gross domestic product. The most widely advocated remedy for fiscal drag is the indexation of tax thresholds. Research Fiscal Drag
The Probert Encyclopaedia was designed, edited and programed by
Matt and Leela Probert
Abbreviations
Research Bracket Indexation
