How does increasing tax withholdings affect an individual's short-term pay?

Increasing tax withholdings leads to a decrease in an individual's short-term pay because more money is taken out of their paycheck before they receive it. When an individual opts for higher tax withholdings, their employer deducts a larger portion of their earnings to cover estimated income taxes. This results in a smaller amount being deposited into their bank account during each pay period.

While increasing withholdings can potentially lead to a tax refund when filing taxes at the end of the year, the immediate impact is a reduction in the funds available for daily expenses or savings. As such, the correct choice is that increasing tax withholdings decreases short-term pay.