Income Tax (Fed Withholding) Question

Try this site: http://www.paycheckcity.com/calcu...lator.html

I work in HR and refer people here all of the time.

Though a bit old, this article helps too:
http://www.cato.org/pub_display.php?pub_id=6187

...by the way, it doesn't seem wrong at all.

It makes sense because it's not just the $300 extra you earned but also the reduction in pre-tax deductions (since you reduced your 401K contribution). Thus your taxable income is higher. That's why it's always advantageous when companies allow employees to pay for parking, health ins/dental, etc. pre-tax.

in other words, the tax is calculated based on your (Gross salary - pretax deductions).

$1877.14 = taxable income from period 1

$2277.96 = taxable income from period 2