2008 tax rate schedule to calculate taxes?

Based on IRS's webstie, the tax rates jump from 15 to 25% once you break a 65100 income level for married filing jointly. So, how does that 65100 is calculated? For example, both parties make 70K and then contribute 8% to 401K, which is 5600 a year. does this reduce the income tax rate from 25 to 15 or does this just reduce the taxible income still at 25%?