Question

7. Most people in the United States pay Social Security taxes. The employee’s and employer’s rate (percent) in 2015 is 6.2% on the first $118,500 of income. All income in excess of $118,500 is not taxed for Social Security purposes. You should note that the employer also contributes 6.2% of your wages!

a. What is the effective Social Security tax rate (percent) in 2014 for a person earning $25,000 a year? 6.2%

b. What is the effective Social Security tax rate for a person earning $100,000 a year? 6.2%

c. What is the effective Social Security tax rate for a person earning $231,000 a year? _____________________________________________________________

Answer 1

I would just say that it is 0% because it explicitly says in the text that "All income in excess of $118,500 is not taxed for Social Security purposes." So, I think that should be enough reasoning.