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January 14, 2006
A Penny Saved is a Penny
This old adage is not true! The reason is is not true is due to the effect of marginal income taxes. Marginal meaning the amount of tax you would pay on the next dollar you earn. We have all experienced receiving a raise or a bonus only to be disappointed with the size after taxes. Assuming a marginal tax rate of 30%, you would need to earn an extra $142.86 to come out with an extra $100 after taxes! Keep in mind that if you plan on spending that $100 on an item with 8% sales tax, you could only buy something that costs $92.60. To purchase an item that costs $100 assuming 8% sales tax and 30% marginal tax rate, you would need to earn an extra
Posted by Russell at January 14, 2006 11:10 AM
