---
title: "Fiscal Drag: Bracket Creep Explained | Model Diplomat"
description: "Fiscal drag is the increase in tax revenue due to inflation pushing taxpayers into higher brackets, impacting government budgets and fiscal policy."
url: "https://modeldiplomat.com/learn/glossary/fiscal-drag"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- Fiscal drag is the automatic increase in a government's real tax revenue when inflation or income growth pushes taxpayers into higher tax brackets without statutory rate changes.
- How is fiscal drag different from bracket creep?
- How do governments neutralise fiscal drag?
- Is fiscal drag always harmful?
- Why is fiscal drag called a 'stealth tax'?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

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In November 2022, UK Chancellor Jeremy Hunt extended the freeze on income-tax thresholds to 2028, relying on fiscal drag to raise an estimated £25 billion-plus without lifting statutory rates.

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