Final answer:
The payroll tax rate for Medicare Part A benefits is 2.9%, which is split equally between the employee and employer, with each contributing 1.45% on all earnings. Self-employed individuals pay the full 2.9%.
Step-by-step explanation:
Both employers and employees finance Medicare Part A benefits through payroll taxes. For Medicare, the payroll tax rate is fixed at 2.9% overall, with no wage ceiling. This rate is split evenly between employer and employee, with each paying 1.45% on all earnings. An employee will see a deduction of 1.45% from their paycheck for Medicare, while the employer contributes an equal amount. Economists suggest that the employer's share may be passed along to employees through lower wages, implying that in effect, the employee may bear the entire cost indirectly. If an individual is self-employed or receiving 1099 income, they must pay both the employee and employer portions of the payroll tax, which totals to 2.9% for Medicare.