Fiscal Drag (also said in German; more rarely translated into German as Steuerdrift)

– The dampening effect on economic activity when the government increasingly withdraws funds from the market sector of an economy. – Condition in an economy when the state has to reduce its demand for goods and services, mainly because of excessive government debt (a climate where there is little government spending to encourage growth in an economy; this occurs as a result of high deficits that require a reduction in public spending). – Cold progression (bracket creep): taxes do not take into account inflation-related increases in profits and income. As a result, more and more taxpayers end up in a higher tax bracket (tax thresholds are not adjusted for inflation, by this because of progressive taxation bringing about an automatic rise in tax revenues). – See crowding out, fiscal rate, lie-and-deceive thesis, progression, cold, Ricardo effect, government debt, consumption-reducing, government-debt-interest-rate relationship, debt ratio, public, Wagner’s law, path inflation.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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