bracket creep

Bracket Creep

A situation where inflation pushes income into higher tax brackets. The result is an increase in income taxes but no increase in real purchasing power.

Notes:

This is a problem during periods of high inflation as income tax codes typically take a longer time to change.

See also: Inflation, Purchasing Power

---

Bracket creep

The gradual movement into higher tax brackets when incomes increase as a result of inflation.

---

bracket creep

The movement of a taxpayer into higher tax brackets as his or her taxable income increases over time. Bracket creep occurs because of the progressive nature of the federal income tax structure, that is, extra income is taxed at higher and higher rates. As a result of bracket creep, more and more individuals seek tax-advantaged investments. Bracket creep was reduced significantly by 1986 tax reform, which reduced the number of tax brackets. Several additional brackets were added in the early 1990s.