1. Why Progressive Tax Brackets Create “Bracket Creep”
When inflation increases nominal salaries while tax thresholds remain fixed, taxpayers are pushed into higher tax brackets without any real increase in purchasing power. This phenomenon is known globally as bracket creep or fiscal drag.
2. Poland’s Proposed 2027 3-Tier Reform
To soften the aggressive jump from 12% to 32% at the 120,000 PLN mark, the upcoming reform introduces:
- Tier 1 (12%): Extended from 120k to 130,000 PLN.
- Tier 2 (24%): A new intermediate bridge rate between 130,000 and 150,000 PLN.
- Tier 3 (32%): Applies only to earnings exceeding 150,000 PLN.
This delivers annual tax savings of up to 3,600 PLN (~$900 USD) for middle and higher earners.
3. International Approaches: Germany, UK, and the US
- Germany: Automatically adjusts the Grundfreibetrag personal allowance and tax formula parameters each year to eliminate Kalte Progression.
- United Kingdom: Experiences severe fiscal drag due to frozen personal allowances (£12,570) until 2031, while Scotland deploys a granular 6-rate progressive ladder.
- United States: Faces the sunset of the 2017 Tax Cuts and Jobs Act (TCJA) individual brackets, prompting intense legislative debate on rate extensions.