Fiscal drag refers to the increase in tax revenue caused when the threshold of a tax is not increased in line with inflation.

For example, suppose a person earns $20 000 per year and is liable to 20% tax on earnings above a threshold of $5 000 per year. Then they pay (20000-5000)*0.2 = $3000 in tax, or 15% of income. Now suppose that due to inflation, their wage goes up by 5%, but the government only increases the tax threshold by 2%. They must now pay (21000-5100)*0.2 = $3180 or 15.14%. The proportion of income as tax has increased - this is fiscal drag.