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5.2 Payroll taxes in U.S. (federal)
Federal programs that provide benefits for retirees, the disabled, and children of deceased workers. Social Security benefits include old-age, survivors, and disability insurance (OASDI); Medicare provides hospital insurance benefits for the elderly. The amount that one pays in payroll taxes throughout one's working career is associated indirectly with the social security benefits annuity that one receives as a retiree
Social security comprises the lion‟s share of federal payroll taxes
(1) Social Security
Social Security ( OASDI, or Old Age, Survivors, and Disability Insurance) began in the late 1930s as a mandatory old-age insurance program for most employees in the private sector Over time, the program was expanded to include disability insurance and mandatory coverage for almost all workers
Main issues on Federal payroll taxes
Progressive
–
vs. regressive
Flat rate – Maximum taxable earnings base
Main issues on Federal payroll taxes In an effort to increase the progressivity of Social Security, the earned income tax credit (EITC) was introduced in 1975 Tax burden of middle class groups
– –
The Federal Unemployment Tax Act (FUTA) tax The state tax
FUTA currently imposes a 6.2% on the first $7000 paid annually by covered employers to each employee
(4) Railroad retirement
The retirement system has two tiers that are financed by federal payroll taxes
–
–
The tier 1 tax rate is equivalent to the combined social security and Medicare HI tax rate, both employee and employer pay taxes on covered wages up to the applicable maximum taxable earnings. Under tier 2, the employer‟s contributions are much greater.
5.2 Payroll taxes in U.S. (federal)
Federal payroll taxes, or social insurance contributions, consist of tax revenues from:
–
– –
–
Social Security, Medicare hospital insurance, Unemployment insurance, Railroad retirement, and other retirement
(3) Unemployment insurance
Unemployment insurance (UI) payroll taxes are used to finance unemployment benefits for workers involuntarily unemployed There are two parts to the UI payroll taxes
5.1 Overview of social security contribution
Tax rates are generally fixed, but a different rate may be imposed on employers than on employees. Some systems provide an upper limit on earnings subject to the tax. A few systems provide that the tax is payable only on wages above a particular amount. Such upper or lower limits may apply for retirement but not health care components of the tax.
5.2 Payroll taxes in U.S. (federal)
Federal Insurance Contributions Act (FICA) tax is a United States Federal payroll (or employment) tax imposed on both employees and employers to fund Social Security and Medicare.
Chapter 5 Social security
contributionபைடு நூலகம்
Overview of social security contribution The payroll tax in U.S. The national insurance contribution in UK
Chapter 5 Social security contribution
(1) Social Security
Benefits earned by covered workers are financed primarily by a payroll tax on a worker‟s wages Both the employee and the employer pay taxes based on the worker‟s earnings up to a maximum amount or taxable maximum earnings base
(1) Social Security
In 2010, the tax rate for both the employee and employer is 6.2% of gross compensation up to a limit of $106,000 of compensation. The self-employed person subject to 12.4 percent. This limit, known as the Social Security Wage Base, goes up each year based on average national wages and, in general, at a faster rate than the Consumer Price Index
(2) Medicare hospital insurance (HI)
This program is financed primarily through payroll taxes, provides hospitalization benefits to eligible persons The HI tax rate is 1.45 percent on all covered earnings Both the employee and the employer pay this tax rate, and self-employed persons pay the combined tax rate.
(1) Social Security
The Social Security Act of 1935 provided monthly benefits to retired workers covered by Social Security . In 1939, benefits were extended to the dependents and survivors of covered workers The program was further expended to provide disability insurance to covered workers and their dependents in 1956 and 1958, respectively
Calss 1A and class 1B paid by employers
(b)
(c) (d)
Class 2-- paid by the self-employed Class 3--voluntary contribution Class 4--paid by the self-employed
Social security contributions are actual contributions receivable by social security schemes organized and operated by government units for the benefit of the contributors to the scheme.
5.1 Overview of social security contribution
Many countries provide publicly funded retirement or health care systems. In connection with these systems, the country typically requires employers and/or employees to make compulsory payments. These payments are often computed by reference to wages or earnings from selfemployment.
5.3 The national insurance contribution in UK
the scope of national insurance
1 Scope of national insurance contribution (NIC) Class 1.
(1)
(2)
(a)
Primary, paid by employees Secondary:
