Final answer:
The taxes that fund Social Security and Medicare are known as Social Security tax and Medicare tax, respectively. These taxes are a form of social insurance intended to provide income and healthcare benefits to retirees and the disabled. They are funded through payroll taxes and function as benefits for later life events.
Step-by-step explanation:
The question seeks to identify the taxes that fund Social Security and Medicare. The correct answer to fill in the blanks is: (1) Social Security, (2) Federal Income, and (3) Medicare. Social Security tax is designed to provide basic pension coverage for the retired and disabled. On the other hand, the Medicare tax helps pay medical costs for qualifying individuals, typically the elderly and certain disabled persons under the age of 65.
Payroll taxes are collected to provide funds for Social Security and Medicare, which are forms of social insurance. These are entitlement programs funded through payroll taxes as part of the Federal Insurance Contributions Act (FICA). Despite being referred to as 'insurance,' these programs differ from private insurance in that current contributors are not immediately eligible for benefits; instead, they receive benefits later, typically in retirement or upon becoming disabled.
The taxation structure that supports these programs is progressive for federal income tax and proportionally taxative for Medicare. However, the Social Security tax becomes regressive above a certain income threshold, since there is a cap on the amount of income subject to the Social Security payroll tax.