Payroll Taxes
Payroll taxes are payments made by workers and their employers as their contribution towards Social security fund, Medicare and other related social insurance plans. Therefore, they are the souces of social welfare benefits. Accordingly, they can pull a string a little bit, so that they make take home pay of employees less than their earnings and labor cost of enterprises higher than the latter, which make the sustaining of long-term tax funding a tough job.
Features:
- Contributions by Employees and Employers: Payroll taxes, workers as well as employers, bear contributions
- Funding Social Security and Medicare: The tax revenues keep the systems of Social Security, Medicare and unemployment insurance running.
- Mandatory Deductions: Along with the employer, payroll taxes are constantly taken from the employees’ salary.
Advantages:
- Direct Funding for Social Programs: The payroll taxes itself is the main source of funding for social welfare programs such as old age retirement, social, and other programs for the welfare of the citizens.
- Stable Revenue for Programs: This kind of income facilitates social security and Medicare funding which ensures a solid base for these programs.
- Employee Benefits: This employee tax specifically serves to finance programs that give workers a safety net and covers any financial support.
Disadvantages:
- Reduction in Take-Home Pay: Withholding a substantial amount of money from workers paychecks could be of no interest to the employees as they aimed at getting a larger disposable income.
- Increased Labor Costs: Businesses can expect to incur additional labor costs as a result of the FICA tax contributions they will be making.
- Sustainability Challenges: Finance of social programs is complicated by the population migration and changes in the cultural features along with the economy.
Examples: Social Security tax, Medicare tax, unemployment insurance tax.
Types of Tax in USA: Features & Advantages
The US taxation system is regulated by the federal, state, and local governments. Each level of government levies its own unique taxation methods to fulfill its different financial obligations. The Internal Revenue Service (IRS), which has a monopoly on federal taxation, checks income taxes, while the state and local governments are the authorities that collect the sales taxes, and property taxes among other imposts specific to their areas.
Table of Content
- Types of Taxes in the USA
- 1. Income Tax
- 2. Sales Tax
- 3. Property Taxes
- 4. Payroll Taxes
- 5. Excise Taxes
- Conclusion