What Taxes Come Out of My Paycheck?
October 23, 2020
By Rahul Iyer
Tax dollars provide the literal and metaphorical infrastructure for each American to achieve the life that they want. While we may not all rejoice over the various taxes that come out of our paycheck, we have an obligation as citizens of America to contribute to the development of the country by paying our taxes. In this article, we will discuss the different taxes that come out of your paycheck before it hits your bank account or your hand.
The taxes that are taken out of your paycheck include Federal Income Tax, State Income Tax, Social Security, Medicare, and Income Tax.
6.2% of your paycheck goes to social security. 85% of the funds taken from your paycheck for social security goes to a trust fund that provides financial benefits for current retirees and their dependents. The remaining 15% goes to a trust fund that pays benefits to individuals with disabilities and their dependents.
1.45% of your income goes to Medicare. This money is taken to help with health-related expenses of all Medicare beneficiaries.
This varies based on established factors. This tax is paid to state workforce agencies. It is used to pay unemployment benefits to state workers. The state in which you work will have its own state unemployment insurance tax rates.
Some states require that employers pay federal unemployment. This tax supports the government’s initiative to provide Unemployment Insurance and Job Service programs in all states.
America uses a progressive system in determining what employees pay in income tax. This means that the amount required by the government is smaller for those who earn less. There are seven tax brackets in 2020. These are 0%, 12%, 22%, 24%, 32%, 35%, and 37%. While this does represent a progressive tax system, the income tax rates have been flattening over the decades. 35 years ago, there were 16 tax brackets.
Think Positively About Taxes
Before you get angry and catapult a stone at your screen, please consider why taxes should be appreciated. Taxes are used to develop our country, provide opportunities, and take care of those who are less fortunate. Yes, we could argue all day about how much is being taken from your paycheck, but that would not be a good use of energy. In one of his presentations, Jim Rohn shared that instead of complaining about taxes, we should look at the fact that America is the golden goose that lays the golden egg. If you want the golden egg, you must take care of the golden goose. Do you agree?