Bracket Creep

AAA

DEFINITION of '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.

INVESTOPEDIA EXPLAINS 'Bracket Creep'

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

RELATED TERMS
  1. Tax Indexing

    The adjustment of the various rates of taxation done in response ...
  2. Economic Recovery Tax Act Of 1981 ...

    A law that lowered income tax rates and allowed for expensing ...
  3. Inflation

    The rate at which the general level of prices for goods and services ...
  4. Purchasing Power Parity - PPP

    An economic theory that estimates the amount of adjustment needed ...
  5. Purchasing Power

    1. The value of a currency expressed in terms of the amount of ...
  6. Deferred Tax Asset

    A deferred tax asset is an asset on a company's balance sheet ...
Related Articles
  1. Economics

    Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.
  2. Investing

    What does deflation mean to investors?

    Before we delve right into the topic of deflation, it should be noted that the causes and effects of deflation are complex economic forces. In this answer, we'll simply introduce readers to the ...
  3. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  4. Economics

    The Importance Of Inflation And GDP

    Learn the underlying theories behind these concepts and what they can mean for your portfolio.
  5. Economics

    Stagflation, 1970s Style

    Find out how Milton Friedman's monetarist theory helped bring the U.S. out of the economic doldrums.
  6. Investing

    What is inflation and how should it affect my investing?

    Inflation, an economic concept, is an economy-wide sustained trend of increasing prices from one year to the next. The rate of inflation is important as it represents the rate at which the real ...
  7. Taxes

    How are savings bonds taxed?

    Learn who is responsible for reporting U.S. EE savings bond interest for taxation and when the interest can be reported for proper taxation.
  8. Retirement

    What are the Social Security tax caps?

    Learn how the Social Security tax cap works, what percentage of income is deducted for Social Security taxes and the history of Social Security tax changes.
  9. Credit & Loans

    Are credit card rewards considered taxable income by the IRS?

    Learn about when the Internal Revenue Service considers the financial value of gifts received from credit card reward programs to be taxable income.
  10. Credit & Loans

    7 Times It Costs More To Pay With A Credit Card

    Paying with credit cards can cost you more. Some merchants add an extra surcharge or convenience fee onto each transaction.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center