Final answer:
As a self-employed individual, Carolyn pays both the employee and employer portions of Social Security and Medicare taxes, totaling 15.3% of her earnings. If she becomes an employee, she would pay only half of these amounts, as her employer would cover the other half. Thus, her Social Security and Medicare taxes would decrease if she accepts the job offer.
Step-by-step explanation:
From the perspective of paying Social Security taxes, becoming an employee would likely result in a decrease in the total amount Carolyn pays towards Social Security. This is because currently, as a self-employed individual, she would be required to pay both the employer (6.2%) and employee (6.2%) portions of the Social Security tax, totaling 12.4% of her income up to the taxable earnings cap. However, if she becomes an employee, she would only be responsible for the employee portion of 6.2%, with her employer covering the other 6.2%.
Additionally, while the Social Security tax rate is proportional, meaning that it is a constant percentage up to a certain income cap, the actual dollar amount contributed by high-income individuals is capped once their earnings exceed the Social Security wage base limit, which can make the overall tax regressive in practice since lower earners pay the tax on a larger proportion of their income.
When self-employed, individuals must also pay a Medicare tax of 2.9% (again, both employee and employer portions), which would be reduced to 1.45% if Carolyn became an employee, with the remaining 1.45% being the employer's responsibility.