Final answer:
It is false that employers pay twice as much for Social Security and Medicare than employees. Both parties contribute equally to payroll taxes, with employees seeing deductions of 6.2% for Social Security and 1.45% for Medicare from their paychecks, and employers matching these percentages. Independent contractors must pay both portions of these payroll taxes.
Step-by-step explanation:
The statement that employers pay twice as much for Social Security and Medicare than each employee is false. Both the employer and the employee contribute equally, each paying half of the total payroll taxes due. Specifically, employees have 6.2% of their wages deducted for Social Security and 1.45% for Medicare.
However, the employer matches these amounts by paying an equal percentage for each employee. It's important to note, as many economists believe, that the employer's share of payroll taxes may be transferred to employees indirectly through reduced wages.
For independent contractors, the situation differs. Those who receive a 1099 tax statement are considered independent contractors and must pay both the employee and employer sides of these taxes, totaling 12.4% for Social Security and 2.9% for Medicare. These tax principles highlight the different nature of payroll taxes when compared to federal income taxes.