Two-Thirds of Tax Units Pay More Payroll Tax Than Income Tax

Publication Date: April 2007

Publisher: Tax Policy Center

Author(s): Leonard E. Burman; Greg Leiserson

Research Area: Banking and finance

Keywords: Economy; Income and Wealth Distribution; Tax Policy; Tax Distribution and Economic Trends

Type: Paper

Abstract:

April 15 is synonymous with taxes in the United States, but most Americans actually pay more payroll taxes than federal income taxes. In 2006 workers and employers each paid 6.2 percent Social Security tax on the first $94,200 of earnings and 1.45 percent Medicare tax on all wages. While the statutory obligation to pay payroll taxes is split evenly between workers and employers, most economists believe that the employer tax usually translates into lower wages, so workers bear the full burden of the tax. Thus, the total payroll tax rate equals 15.3 percent of earnings for most workers.