Understanding the Current Rates of Payroll Tax
Currently, there are set to be increased employee contributions according to the federal payroll tax table. However, those increases will likely effect those with higher salaries at a greater percentage then those that are lower and middle class. A portion of FICA rates has a maximum threshold, while another portion is a percentage of an individuals salary that has no limit.
The tax reform movement has sought to distribute taxes in a more fair manner. While they have proposed the value added tax and other taxes that would distribute the tax burden more evenly, every type of tax has the potential to be distributed unevenly among taxpayers. Due to the nature of paying a flat percentage of salary toward taxes, many taxpayers with lower salaries pay a higher percentage of their salary towards taxes.
Currently, most tax payers pay more in payroll taxes then they do income taxes. Social Security is taxed at an average of around six percent of an employee’s income. Medicare is taxed at an average of one and one half percent with no payroll maximum deduction. Employers are also responsible for payroll tax rates of approximately the same rates as employees on a per employee basis.