Our employer started a SIMPLE IRA back in August, 1998. I've been told that if I remove money from the plan, the amount withdrawn will be taxed, and an additional 10% penalty assessed. Is the penalty assesed on the total amount withdrawn, or is it on the tax? For example, if I withdraw $10,000, and my tax bracket is 28% (or $2,800), is the 10% penalty $1,000 ($10,000 x 10%) or $280.00 ($2,800 x 10%)?

The penalty is imposed on the amount of the withdrawal. In your example, it would be imposed on the $10,000 withdrawn.

Further, if the withdrawal occurs during the 2 year period following the date on which you first participated in the SIMPLE plan, the penalty is increased from 10% to 25%!