The Social Security tax is formally enacted under United States law through the Federal Insurance Contributions Act, or FICA, a piece of legislation which also extends to the ability to fund Medicare. In this way, government legislators intended for the Social Security tax rate maintained to be placed in accordance with the eventual financial benefits to be administered to the individual taxpayer.
Social Security taxes are thus paid by people to pay for old age, survivor, and disability benefits, and the legal language pertaining to them can be found in United States Code Title 46, Subtitle C, Chapter 21.
The Social Security tax will not come from the specific source of the Federal Insurance Contributions Act in the event of a person who is not a payroll of another individual or of a larger organization, but is instead self-employed. Social Security taxes in such cases will come instead under the heading of the Self-Employment Contributions Act of 1954. The Social Security tax is considered, as a general subject, to be a kind of payroll tax. In this regard, the Center on Budget and Policy Priorities has pointed to the fiscal burden posed by payroll tax obligations as being more substantial than those posed by the equivalent area reserved for taxes paid on income.
The Social Security tax rate does not include under its coverage income generated from investments. Social Security taxes can be ruled as unnecessary in the event that an employee’s employer primarily acts toward him or her as an educator.