Social Security and Medicare Taxes and Premiums: Fact Sheet

Publication Date: January 2003

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance

Type:

Abstract:

Taxes: Financing for Social Security—Old Age, Survivors, and Disability Insurance (OASDI)—and the Hospital Insurance (HI) part of Medicare is provided primarily by taxes levied on wages and net self-employment income. They are referred to as FICA taxes (for Federal Insurance Contributions Act) and SECA taxes (for Self-Employment Contributions Act). The FICA tax is paid by employees and employers; the SECA tax is paid by the self-employed (about 96% of the work force is required to pay them). Both have three components: OASI, DI, and HI. The FICA tax was first levied in 1937 at a rate of 1% (for both employee and employer) on earnings up to $3,000. The current rate is 7.65% — 6.2% for OASDI, 1.45% for HI. The SECA rate for the self-employed is 12.4% for OASDI, 2.9% for HI. The OASDI tax is levied on earnings up to $87,000 in
2003 (earnings subject to the OASDI tax are indexed to increases in the national average wage). The HI tax is levied on all earnings. This fact sheet is updated annually.