If you had to choose between a five percent pay raise and a five percentage point decrease in your taxes, which one would you take? Most people would erroneously select the former. Actually, the latter is much better. Let me demonstrate with a simple example. Let’s suppose you earn an annual salary of $100,000 and you currently pay out 35% of your income in taxes. First, let’s see how a five percent increase in pay would affect you. While your gross income would increase to $105,000, your net income would increase from $65,000 to $68,250, a gain of only $3250. Now let’s see where a five percentage point drop in your tax rate (without the five percent increase in pay) would put you. Well, your gross income would obviously not increase. You would still be making $100,000 a year. However, your net income would increase a full $5000 to $70,000. That’s $1750 more than you would get from the pay increase of the same percentage! Remember, an increase in net income (how much you actually get) is much more important than an increase in gross income (how much you make).