Question

In 2020, a person in the U.S. who earns $25,000 pays a marginal tax rate of ______________% into the Social Security Program, while a person who earns $140,000 pays a marginal tax rate of ______________% into the Social Security Program.

Answer 1

In 2020, a US person earning $25,000 pays a 6.2% Social Security tax rate, while someone earning $140,000 effectively pays 0% on earnings above $137,700 because of the wage limit.

Step-by-step explanation:

In 2020, a person in the U.S. who earns $25,000 pays a marginal tax rate of 6.2% into the Social Security Program, while a person who earns $140,000 pays a marginal tax rate of 0% (on the amount over $137,700) into the Social Security Program. This is because the Social Security payroll tax is imposed at a rate of 12.4%, split evenly between the employer and employee (6.2% each), up to a certain wage limit. In 2020, this wage limit was $137,700, meaning income earned above this amount was not subject to Social Security payroll taxes, making it a regressive tax structure at higher income levels.