How big an effect can income tax have? Assume two people have $5,000 to invest every year for a period of 30 years. One person invests in a potentially tax-free account like a Roth 401(k) that earns exactly 6% per year, and the other person invests in a taxable account that also earns exactly 6% each year, using funds from the taxable account to pay any taxes due each year. Assuming a tax rate of 28%, in 30 years the tax-free account will be worth $395,291, while the taxable account will be worth $295,896. That's a difference of $99,395.