Notes on Bracket Creep and How to Compute It

Recent empirical studies for Austria which aimed to estimate the additional tax burden due to the progressivity of the personal income tax (referred to as "bracket creep") found a number of notable budgetary effects. Methods to estimate the bracket creep are discussed within a coherent framework. It is shown that same approaches lead to a systematic overestimation of the bracket creep. It can be expected that the tax reform will reduce the tax burden to a substantially greater extent than would have been necessary to compensate for bracket creep only.