Question

What is the total effective 2018 FICA tax rate, including both employee and employer rates?

a) 7.65%
b) 15.3%
c) 6.2%
d) 1.45%

Answer 1

The total effective 2018 FICA tax rate, including both employee and employer rates, is 15.3%. Both the employee and employer contribute to Social Security and Medicare taxes.

Step-by-step explanation:

The total effective 2018 FICA tax rate, including both employee and employer rates, is 15.3% (Option b). The FICA tax rate consists of two components: Social Security tax and Medicare tax. Both the employee and employer contribute to these taxes.

For Social Security, the employee contributes 6.2% of their gross annual income, and the employer also contributes 6.2%. Similarly, for Medicare, the employee contributes 1.45% and the employer contributes 1.45%. Thus, the total FICA tax rate is the sum of both employee and employer contributions, which is 15.3%.

It is important to note that even though the employee sees only their portion of the deductions on their paycheck, economists argue that the employer's portion is likely indirectly passed on to the employee through lower wages.