Why part of a raise disappears
Every extra dollar is taxed at your marginal rate, not your average rate. A single filer in the 12% bracket keeps 88 cents of each extra dollar before FICA; in the 22% bracket they keep 78 cents, and FICA takes 7.65% on top until the Social Security wage base is reached.
The result is that the "share of the raise you keep" line is always lower than 100%, and lower still for higher earners or where state tax applies.
The page reaches that number through the same paycheck calculation that powers the take-home pay page: it computes the full year before the raise and the full year after, then subtracts, so the federal tax, FICA and any state tax on just the added income are printed as their own lines.
Pre-tax settings are held constant
If you contribute 5% of pay to a traditional 401(k), that percentage is assumed before and after the raise, so the contribution rises with the salary and the tax saving scales with it. The same applies to pre-tax health premiums entered as an input elsewhere.
Changing your contribution rate after a raise is often the cheapest way to absorb it: the raise pays for the extra savings while the tax bill barely moves.
The 401(k) money is pre-tax, so it is not lost to tax - it moves into your retirement account, and the result keeps that separate from the “not kept” total rather than lumping the contribution in with what went to the government.
Real pay and inflation
A raise below inflation reduces buying power even though the number on the contract is larger. If prices rise 3% and your pay rises 2%, you are 1% worse off in real terms.
The inflation comparison needs a salary that merely keeps pace: current pay times one plus the inflation rate. The difference between that figure and your new salary is the real raise.
The comparison is a percentage difference, not compounding: a 3% raise with 2% inflation prints as about a 1% real gain, which is close enough to the compounded figure for a decision this size. The page then shows the salary that would merely keep pace, so the real-increase number has a concrete counterpart to read against.
What the raise does not change
It does not change the rate on the dollars you already earned: brackets are marginal, so only income above each threshold moves up a step. Pre-tax contributions held at a percentage of pay also rise with the salary, which quietly absorbs part of the increase.
Payroll systems then withhold on the assumption that the new rate applies to the whole year, so the first check after a raise often looks smaller than the arithmetic suggests; the difference settles at filing. An estimate, not a return, and not tax advice.
The timing of a raise matters as much as its size
A raise is not worth the same in January as it is in October. Getting 5% in October means the year closes with a quarter of it applied, so the first full year at the new rate is the one to compare, and a raise that arrives three months late is worth roughly a quarter of an on-time one for that year alone.
Raises also compound. Five percent this year and another five next year is 10.25% over two years rather than 10%, because the second one is calculated on the higher base. That is why a one-point difference in the percentage, 4% against 5%, is worth more over a decade than the same dollars paid once as a bonus.
Which is the other comparison worth making: a $3,000 raise is permanent and compounds, while a $3,000 bonus is paid once and is normally withheld at the 22% supplemental rate. If the choice is between them, the raise wins from the second year onward even though the bonus looks larger in the first pay period.
And a title change without money is not a raise. If the offer is responsibility now and pay later, the two things to agree in writing are the date and the range, because this page only prices what actually appears on the payslip.
One more number worth writing down. A raise agreed as a percentage of pay also raises every contribution that is set as a percentage: a 5% raise on a 6% retirement deferral moves both numbers, so the contribution grows in dollars and the increase in take-home is smaller than the same raise would deliver against a fixed dollar deferral. That is one reason the figure agreed in the meeting and the figure on the payslip differ by more than tax alone, and it is the setting this page holds constant on purpose.
Danfio