Question

Explain how the Social Security tax system works and the challenges it faces.

Answer 1

Social Protection is tax on the payroll. Any U.S. employee and employer is required to pay tax on Social Security. As an employer, you will be depriving employee wages of the tax. You'll also make a contribution to Social Security based on the employee's wages. Charge on Social Welfare is a part of FICA budget. The other part of the FICA tax is tax on medicare. Individuals who work for themselves do not pay tax on Social Security. Rather, they are paying tax on self-employment. Self-employment tax is similar to paying portions of FICA tax on both the employee and the employer.

The federal government uses the Social Security taxes to pay social security benefits. Social Protection is a program intended to help assist disabled men, widows and widows as well as individuals with disabilities. Tax on social security is a flat sum of 12.4 per cent. Contractor and contractor bill half each. You will withhold 6.2 per cent of employee salaries and contribute 6.2 per cent on the basis of employee salaries. This split ensures employees do not lose more than 10 percent of their paycheck to a single tax type. Social Security tax is typically paid on the salaries of an employee regardless of their age or if they receive social security benefits. Some wages, however, such as reimbursement of employee expenditures, are excluded from social security tax

Income taxes that you pay are paid into the United States general fund. They can be used for any purpose but there are different social security taxes. These taxes are paid into special trust funds that should only be used to pay current and future retirement benefits for the Social Security as well as disability benefits and benefits for widows and widows. Today's employees pay a amount, which in effect is charged to the beneficiaries of today those employees who have retired and are now receiving compensation from the Social Security. When the workers of today retire, they will tap into the benefits that the workers of tomorrow will be paying.

A demographic shift namely the retirement of baby boomers-is one of the biggest problems facing social security. We are likely to see more than 70 million baby boomers reach retirement between 2010 and 2030, which means a significant rise in the number of potential beneficiaries. Social Security architects simply couldn't predict such an incredible surge in birth rates would happen.

The program's not so major demographic change relates to growing life expectancies. In the mid-1960s the average adult in the United States had around 70 years of life expectancy. Life expectancies have risen to 78.8 years by the mid-2010s. This improved life expectancy can be attributed to improved health education , increased access to health care and improved pharmaceutical options. Again, Social Security architects weren't predicting that life expectancies would improve as much as they have. The consequence is that we have people who live longer than ever before and are willing to receive Social Security checks over an extended time span.