For wages less than the maximum taxable wage base, Social Security contributions

Question

For wages less than the maximum taxable wage base, Social Security contributions (including those for Medicare) by employees are 7.65% of the employee's wages.†
(a) Find an equation that expresses the relationship between the wages earned (x) and the Social Security taxes paid (y) by an employee who earns less than the maximum taxable wage base.

(b) For each additional dollar that an employee earns, by how much is his or her Social Security contribution increased? (Assume that the employee's wages remain less than the maximum taxable wage base.)

(c) What Social Security contributions will an employee who earns $55,000 (which is less than the maximum taxable wage base) be required to make?

Explanation / Answer

(a) social security = 7.65% of wages Let social security = y, let wages = x y = .0765x (Make sure and remember to convert the percentage to a decimal) (b) it's a slope question... rise over run... change in y over change in x... If you make one dollar... and multiply it by 7.65%... how much more social security do you pay? (c) Wages = $55,000 = x ...plug $55,000 into your equation from (a) Good luck!

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