An IRA (Individual Retirement Account) allows taxpayers to invest money out of their personal income before taxes
Financial advisors will often tell their clients that they will realize more net pay (income after taxes) if they invest with an IRA versus saving their money in a simple savings account at a bank. Explain how this is so.
Suppose that you are in the 28% tax bracket. If you save $1000 per year in a savings account without tax protection you will see a $1000 drop in your net income. However, if you save $1000 through an IRA you will only experience a $720 drop in your net income. The reason for this is that the $1000 is not subject to taxation. Normally 28% of this $1000 of income would be withheld ($280).
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What is the effect of a minimum wage law in a monopsony labor market?
What will be an ideal response?