Final answer:
FICA payroll taxes fund Social Security, which provides benefits for retirees, disabilities, and survivors, and Medicare, which covers healthcare for the elderly. Employees see 6.2% deducted for Social Security and 1.45% for Medicare from their paychecks, with employers matching these contributions.
Step-by-step explanation:
The benefits that FICA payroll taxes pay for are Social Security and Medicare. FICA, which stands for the Federal Insurance Contributions Act, ensures that a percentage of employees' paychecks are collected to fund these programs.
Specifically, employees have 6.2% of their paychecks deducted for Social Security, which provides benefits for retirees, disabilities, and survivors, and 1.45% for Medicare, which covers healthcare for the elderly. Employers match these contributions, effectively doubling the amounts. Although, as some economists note, the employer's contribution may be reflected in the form of lower wages.
The payroll taxes for Social Security are capped at a certain wage limit, where for 2015, this limit was set at $118,500. This cap means that income above this limit is not subject to Social Security taxes. On the other hand, Medicare taxes are fixed at 2.9%, with no upper ceiling on the income subject to this tax.