What is ‘Tax Drag’
The reduction of potential income due to taxes. Drag describes the loss in returns owing to taxation, usually on an investment. Tax drag is commonly used when describing the difference between an investment vehicle that is tax-sheltered and one that is not. For many individuals, tax drag can have a significant effect on overall investment performance.
Explaining ‘Tax Drag’
Tax-efficient investing techniques are very important for recognizing capital gains, transferring wealth and estate planning.
Further Reading
- Tax Management of Factor-Based Portfolios – jii.pm-research.com [PDF]
- The Economics of Public Finance – www.jstor.org [PDF]
- 10 The effect of fiscal drag on tax revenue and tax burden – books.google.com [PDF]
- After the death of inflation: will fiscal drag survive? – onlinelibrary.wiley.com [PDF]
- Optimal financing by money and taxes of productive and unproductive government spending: Effects on economic growth, inflation, and welfare – papers.ssrn.com [PDF]
- Can fiscal drag pay for the public spending effects of population ageing in New Zealand? – www.tandfonline.com [PDF]
- Globalization, tax reform ideals and social policy financing – journals.sagepub.com [PDF]
