What is fiscal drag and bracket creep?

What do these terms actually mean?

Fiscal drag describes the process where tax thresholds are not adjusted for inflation or do not go up with earnings growth, resulting in a rise in tax revenue.

An example of this would be if Janet earns R20 000 per year, and has to pay 20% tax on earnings above R5 000 for year one. She would then pay (R20 000 – R5 000) multiplied by 0.2, which equals R3 000 or 15% of her income.

If Janet ‘s pay goes up by 5% to R21 000 to compensate for inflation, and the government increases the tax threshold by 2% in year two to R5 100, she would pay (R21 000 – R5 100) multiplied by 0.2 which equals R3 180 or 15.14% of her income in taxes.

The proportion of Janet’s income in taxes has increased. This is fiscal drag or bracket creep. This illustrates that when there is inflation, taxes rise unless the tax rates or tax accordingly