Legal Definitions - bracket creep

Definition: Bracket creep is a term used to describe the process by which inflation or increased income pushes individuals into higher tax brackets.

Example: Let's say you earn $50,000 per year and your tax rate is 20%. That means you pay $10,000 in taxes. However, if your income increases to $60,000 per year and your tax rate is still 20%, you now pay $12,000 in taxes. This is because you have been pushed into a higher tax bracket due to your increased income.

Explanation: Bracket creep occurs when inflation or increased income causes individuals to move into higher tax brackets. This means they pay a higher percentage of their income in taxes, even if their income hasn't increased significantly. In the example above, the individual's income only increased by $10,000, but they ended up paying $2,000 more in taxes due to bracket creep.