Fiscal Drag


Fiscal Drag

Fiscal drag is an economics term referring to a situation where a government's net fiscal position (equal to its spending less any taxation) does not meet the net savings goals of the private economy. This can result in deflationary pressure attributed to either lack of state spending or to excess taxation.

One cause of fiscal drag is the consequence of expanding economies with progressive taxation. In general, individuals are forced into higher tax brackets as their income rises. The greater tax burden can lead to less consumer spending. For the individuals pushed into a higher tax bracket, the proportion of income as tax has increased, resulting in fiscal drag.

Fiscal drag is essential a drag or damper on the economy caused by lack of spending or excessive taxation. As increased taxation slows the demand for goods and services, fiscal drag results. Fiscal drag is a natural economic stabilizer, however, since it tends to keep demand stable and the economy from overheating.

Because it is an economic stabilizer, fiscal drag can influence economic equality among citizens of the same region.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Fiscal drag — refers to the process where tax thresholds are either not adjusted for inflation, or fail to keep pace with earnings growth, causing in either case an automatic rise in tax revenues.Example of nominal fiscal dragSuppose a person earns $20,000 per …   Wikipedia

  • fiscal drag — ˌfiscal ˈdrag noun [uncountable] ECONOMICS when rising incomes mean that the government receives increasing amounts of tax, as people move up into higher tax bracket S (= levels of income with a particular tax rate). Taxes have to be adjusted to… …   Financial and business terms

  • fiscal drag — /fiskalˈdrɛɡ, ingl. ˈfɪsk(J)ldr(g/ [loc. ingl., comp. di fiscal «fiscale» e drag «trascinamento»] loc. sost. m. inv. prelievo fiscale, drenaggio fiscale …   Sinonimi e Contrari. Terza edizione

  • fiscal drag — noun The means by which the inland revenue automatically benefits from any increase in earned income without any actual increase in taxation rates • • • Main Entry: ↑fiscal …   Useful english dictionary

  • Fiscal Drag —   [ fɪskəl dræg, englisch], Built in Flexibility …   Universal-Lexikon

  • fiscal drag — / fiskl dræg/, it. /fiskal drɛg/ locuz. ingl. (propr. draga fiscale ), usata in ital. come s.m. (econ., giorn.) [quota di prelievo fiscale operata in misura sempre maggiore sui redditi, come conseguenza del loro aumento causato dall inflazione]… …   Enciclopedia Italiana

  • fiscal drag — (pron. fiskl drèg ) Inglese, è egregiamente tradotto con drenaggio fiscale . Ma gli stessi ministri italiani parlano di modificare la curva delle aliquote tributarie per correggere gli effetti del fiscal drag . È il caso che si ha in tempi di… …   Dizionario dei Modi di Dire per ogni occasione

  • fiscal drag —  The time between when a government spending policy is approved and when it affects the economy.  ► “But like Mr. Bush before him, Mr. Clinton has locked in the fiscal drag of a tax increase. (Wall Street Journal, April 5, 1994, p. A18) …   American business jargon

  • fiscal drag — fi·scal drag loc.s.m.inv. ES ingl. {{wmetafile0}} TS econ. → drenaggio fiscale {{line}} {{/line}} DATA: 1980. ETIMO: comp. di fiscal fiscale e drag drenaggio …   Dizionario italiano

  • Fiscal Drag — fiskalische Bremse; Effekt progressiver Besteuerung, der das Anwachsen des Nationaleinkommens im Aufschwung bremst, weil die Steuerbelastung aufgrund ihrer Aufkommenselastizität von größer als Eins überproportional steigt (⇡ Built in… …   Lexikon der Economics


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