Tag Archives: progressive taxation

Fiscal drag – explanations

Fiscal drag  - a definition
No holding back the social economy

As we leave the summer holidays behind in 2013 we will be adding a new occasional feature to Mining the SEEM. Explanations.

Part of our social finance mission at SEEM is not only to make finance more accessible to communities and social business, but also to help that constituency understand and be more usefully equipped to negotiate their way through  their financial development,

Explanations will be our way of developing that understanding. Taking a key concept, phrase or idea in economics, banking or social finance and offering up a classic definition for it.

Part of the problem with technical definitions is that technicians and technocrats also use even more technical language to define their concepts – perhaps obfuscating the idea even further.

If key concepts are used in the definition we will also add some supplementary explanation in plain English to frame the definition we have created. You can see an example of this occasional journal entry below – Fiscal Drag.

(If you come across a classic piece of finance speak or strangulated phrases in banking drop our editor a line and we’ll tease out a clearer view and publish the definition for you.

Contact us at editor (at) miningtheseem.org.uk   )

Fiscal Drag – a definition

The restraining effect upon the growth of demand and output that results from increases in the effective rates of taxation under inflation. This happens where progressive tax rates and increased wages and salaries bring people into higher tax brackets, even though real income may be falling…

Supplementary definitions:

Inflation: The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum. (See more about inflation on investopedia.com here. )

Progressive tax: The term is frequently applied in reference to personal income taxes, where people with more income pay a higher percentage of that income in tax than do those with less income. (Read more about progressive tax concepts on Wikipedia here.)

Real income: Income, as of a person, group, or country, that has been adjusted for changes in the prices of goods and services. Real income measures purchasing power in the current year after an adjustment for changes in prices since a selected base year. ( Read more about real income calculation on the pages of the Free Financial Dictionary here. )

The SEEM Team – working with interesting ideas

Ethical business with a social dimension...
Ethical business with a social dimension…
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