Final answer:
FICA taxes have a wage cap, which is the limit up to which the Social Security payroll tax is applied at a proportional rate. Beyond this limit, it becomes regressive, as individuals with higher incomes pay a smaller percentage of their income. The Medicare payroll tax is proportional with no upper ceiling.
Step-by-step explanation:
FICA taxes are applied to employees' incomes up to certain limits, which are referred to as the wage cap. The Medicare payroll tax is considered a proportional tax, as it levies a fixed percentage of 2.9% on all wages earned with no upper ceiling. In contrast, the Social Security payroll tax is also imposed at a proportional rate, which was 12.4% up to a wage limit of $137,700 in 2020. However, once income exceeds that wage limit, the Social Security tax becomes a regressive tax, meaning individuals with higher incomes pay a smaller share of their income in tax compared to those with lower incomes.