_____ occurs when tax-free income allowances grow at a slower rate than earnings.
A) Fiscal drag
B) Revenue equivalence
C) De?ation
D) In?ation illusion

Question

Quizplus · Accepted Answer

Fiscal drag happens when people's income grows faster than the tax thresholds, meaning a larger portion of their income becomes taxable at higher rates, effectively increasing their tax burden without an explicit increase in tax rates. This often occurs in times of inflation when nominal incomes rise.

_____ Occurs When Tax-Free Income Allowances Grow at a Slower