You pay more in Social Security tax than you pay in income tax

Do you know how much tax you pay to the Social Security system?

Would you be surprised to learn that you pay more in Social Security tax than you pay in income tax? If you are like most people, you do!

If you're self-employed, you probably know this because you fill out the forms and write out the check, but if you are employed by someone else, your Social Security tax is a kind of hidden tax. You fill out no forms and write no checks. Your employer pays it for you and reports only half of it to you on your annual W-2. The other half is called the "employer's portion," but it's levied on your income. Self-employed people pay both halves themselves.

How much is so much? The Social Security tax (known as FICA for employees and self-employment tax for the self-employed) is 15.3 percent of the first $76,200 (2000 figure) of earnings from work. Every dollar you earn above that is taxed at 2.9 percent. The 2.9 percent goes to pay for Medicare, the rest goes for old-age, survivor and disability insurance (OASDI).

The reason you probably pay more in Social Security tax than in income tax is that most people's income tax rate is only 15 percent. What's more, the income tax system allows you a wide variety of deductions, the most important of which are personal exemptions and the standard deduction.

The situation reverses for upper-income folks. This is due to two factors: Their income tax rate is higher, and their Social Security tax rate levels off to 2.9 percent.

Credit for children
The high Social Security tax figured importantly in the debate over the $500 tax credit for children enacted a few years back. Because of the standard deduction and personal exemptions, many of the working poor pay little or no income tax. But they do pay a 15.3 percent Social Security tax.

Normally, a tax credit is lost if you don't have any income tax to apply it to. Democrats didn't like the idea that the working poor would lose the credit and insisted that it apply regardless of the amount of income tax otherwise due -- making it a "refundable" credit. Some Republicans called this covert welfare. Democrats countered by pointing to the Social Security tax paid by these individuals.

http://www.baltimoresun.com/business/sns-taxes-socialsecurity,0,4765006.htmlstory

You pay more in Social Security tax than you pay in income tax

You pay more in Social Security tax than you pay in income tax

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