Question

Word Problem 9-22 (Static)

(LU 9-2 (1)]

The Social Security Administration increased the taxable wage base from $127,400 to $128,400. The 6.2% tax rate is unchanged. Joe

Burns earned over $130,000 each of the past two years.

a. What is the percent increase in the base? (Round your answer to the nearest hundredth percent.)

Percent increase

b. What is Joe's increase in Social Security tax for the new year?

Increase in social security tax?

Answer 1

0.7849 %

$62

Explanation:

Given that:

Initial taxable wage = $127,400

New taxable wage = $128,400

Amount earned each of the past two years = $130,000

The percentage increase :

((new wage - initial wage) / initial wage) * 100%

((128400 - 127400) / 127400) * 100%

0.0078492* 100%

= 0.7849 %

Increase in social security tax for the new year:

Increase in wage * social security tax rate

(128400 - 127400) * 6.2%

1000 * 6.2%

= $62