Final answer:
An individual owning a corporation as the sole employee will pay corporate income taxes and payroll taxes, while self-employed individuals will pay self-employment tax and federal income tax. The social security tax is proportional as it applies a consistent rate up to an income cap.
Step-by-step explanation:
Federal Taxes for Different Business Structures
When considering the federal taxes that must be paid by different business entities, it is crucial to understand the various types that they would be subject to. For an individual who owns a corporation and is the only employee, they must contend with corporate income taxes, payroll taxes (which include social security and Medicare taxes), and possibly others depending on the business activities.
For those who are self-employed and operate unincorporated businesses, they are generally responsible for paying the self-employment tax, which is a combination of social security tax and Medicare tax. They must also pay federal income tax based on their net earnings from self-employment.
Regarding the social security tax being at a rate of 6.2% on income below $113,000, this tax is a proportional tax because it is applied at a consistent rate up to a certain income cap. Taxes that charge a flat rate regardless of the amount of income are considered proportional.