The tendency under progressive tax systems for the proportion of incomes collected in taxes to rise under inflation. This results from the fact that the threshold at which income tax becomes payable, and the thresholds for the application of higher tax rates, are fixed in money terms. Inflation thus tends to increase the proportion of incomes collected in direct taxes. The existence of some specific taxes tends, however, to reduce the proportion of incomes collected in indirect taxes when prices rise, and the fact that many taxes are collected in arrears also tends to reduce fiscal drag.