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Glossary entry · The silent subtractors
Progressive tax
Definition
A tax design where the rate rises with income, but each rate only applies to the portion of income inside its own bracket. Most income taxes in Europe and the US are progressive. The opposite, a flat tax, applies a single rate to all income.
Example
A worker on €20k and a worker on €200k both pay the same rate on the first €12,000 of income, even if the higher earner pays much more on the rest.
Related
The silent subtractors
Fee
A charge taken from your investment by a fund, broker, or advisor, every year, forever.
Read →Tax
The other silent subtractor. Almost every gain you make is taxed somewhere.
Read →Expense ratio
The annual fee a fund charges, expressed as a percentage of your investment.
Read →Commission
A fee charged by a broker each time you buy or sell. Mostly $0 with modern brokers.
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