If a taxpayer's marginal tax rate is decreasing, a taxpayer contributing to a traditional IRA can earn an after-tax rate of return greater than her before-tax rate of return.

Question

Quizplus · Accepted Answer

This is because the contribution to a traditional IRA reduces taxable income, causing the taxpayer's marginal tax rate to decrease. As a result, the after-tax rate of return on the investment made with pre-tax dollars in the traditional IRA would be greater than the before-tax rate of return.

If a Taxpayer's Marginal Tax Rate Is Decreasing, a Taxpayer