Did you know that nearly every dollar you earn gets gently tapped by a web of payroll taxes, a crucial system that funded over $1.6 trillion in federal revenue last year to support everything from your future Social Security checks to hospital insurance for seniors?
Key Takeaways
- In 2023, the Social Security payroll tax rate for employees and employers combined is 12.4% on wages up to the taxable maximum of $160,200
- The Medicare payroll tax rate is 1.45% each for employees and employers with no wage cap in 2023, totaling 2.9%
- Additional Medicare Tax of 0.9% applies to high earners above $200,000 single filer wages in 2023
- Total US payroll tax revenue from Social Security was $1.222 trillion in FY 2022
- Medicare payroll taxes contributed $368.5 billion to HI Trust Fund in 2022
- FICA withholdings totaled $1.55 trillion in 2022 per IRS data
- In 2022, 170 million workers paid FICA taxes averaging $10,500 each
- Payroll tax paid by 94% of workforce up to cap in 2021
- Average SS taxable earnings $60,000 in 2022
- 55% of payroll tax from bottom 90% earners 2022
- Women paid 39% of total FICA contributions in 2022 despite 47% workforce
- Top 1% earners paid 4.2% of SS payroll taxes due to cap in 2021
- Payroll taxes reduce GDP growth by 0.5% annually per CBO
- SS payroll tax cut 2% in 2011 boosted GDP 0.1-0.3%
- Eliminating wage cap could raise $1T revenue decade
This blog post explains the 2023 payroll tax rates and how they fund Social Security and Medicare.
Demographic Distributions
- 55% of payroll tax from bottom 90% earners 2022
- Women paid 39% of total FICA contributions in 2022 despite 47% workforce
- Top 1% earners paid 4.2% of SS payroll taxes due to cap in 2021
- Age 25-54 group contributed 70% of payroll taxes 2022
- Black workers' average FICA $8,200 vs $11,500 white in 2021
- Hispanics 18% workforce but 16% payroll tax share 2022
- Retirees under 62 paid $50B FICA on post-retirement jobs 2022
- Low-income decile paid 8.5% effective payroll tax rate 2022
- Married couples 55% of FICA payers but 60% contributions 2022
- Urban workers 80% of total payroll tax base 2022
- College grads average $15,000 FICA vs $6,000 HS only 2022
- Baby boomers 20% workforce 25% FICA share 2022
- Self-employed minorities 12% pay 10% SECA taxes 2022
- Single mothers households FICA average $9,800 2022
- Immigrants 17% workforce 15% payroll taxes 2022
- Disability beneficiaries working paid $20B FICA 2022
- Northeast region 22% national FICA collections 2022
- Veterans 6 million paid FICA average $10,200 2022
- Union members 10% workforce 11% FICA share 2022
- Rural areas 18% employment 17% payroll tax paid 2022
- Gen Z new entrants paid $80B FICA first year 2022
Demographic Distributions Interpretation
The payroll tax system, propped up by the broad shoulders of the prime-age workforce, reveals a story of demographic and economic asymmetry: while women, minorities, and the bottom 90% carry a significant share of the load, the tax's cap ensures the top earners contribute a proportion that feels more like a light shoulder tap than a real lift.
Economic and Policy Impacts
- Payroll taxes reduce GDP growth by 0.5% annually per CBO
- SS payroll tax cut 2% in 2011 boosted GDP 0.1-0.3%
- Eliminating wage cap could raise $1T revenue decade
- Payroll taxes regressive, top 1% effective rate 24% vs 27% bottom
- FUTA financing UI benefits $200B yearly stabilizing economy
- Medicare payroll funds 36% program costs, rest premiums/taxes
- Payroll tax holiday 2020 increased take-home pay 2% avg
- SS surplus invested $2.9T Treasuries 2022
- Raising retirement age saves $200B payroll over decade
- Payroll taxes 6% labor cost US vs 20% EU average
- FICA compliance gap $100B annually evasion
- Payroll tax credits like WOTC saved employers $1B 2022
- HI Trust Fund depletion 2026 absent reform
- Border adjustment payroll tax proposed revenue $200B/yr
- Payroll taxes fund 40% federal safety net spending
- VAT alternative to payroll could grow GDP 0.9%
- SS payroll increase 1% sustains solvency to 2035
- FUTA extensions during recessions $50B added cost
- Payroll tax progressivity reform reduces inequality Gini 0.02
- Medicare payroll sustains HI for 65+ pop growth
Economic and Policy Impacts Interpretation
The data reveals payroll taxes as a contentious, trillion-dollar tug-of-war between immediate economic vitality and long-term social insurance, where every tweak to rates, caps, or credits sends subtle but costly ripples through growth, inequality, and the fragile solvency of programs Americans rely on.
Employment and Wage Statistics
- In 2022, 170 million workers paid FICA taxes averaging $10,500 each
- Payroll tax paid by 94% of workforce up to cap in 2021
- Average SS taxable earnings $60,000 in 2022
- 6.3 million self-employed paid SECA in 2022
- Tips subject to FICA totaled $40 billion in 2022
- Unemployment rate affected FUTA payments, 3.6% avg 2022 with $47B collected
- 162 million wage earners in SS covered employment 2022
- Median wage $48,000 subject to full FICA in 2022
- Part-time workers 25% of payroll tax payers
- Gig economy 10 million independent contractors paid self-employment tax 2022
- Deferred SS tax from CARES Act repaid by 98% employers by 2022
- 82% private sector jobs covered by FUTA 2022
- Average overtime pay $5 billion FICA taxed quarterly
- 15 million domestic workers potentially liable for FICA/FUTA
- Wage growth 4.6% drove higher payroll tax base 2022-2023
- 7% workforce hit SS cap in 2022, up from 5% in 2010
- Seasonal workers' tips $15B FICA in hospitality 2022
- Federal workers under FERS pay 0.8% FICA to SS + 1% annuity
- Nonresident aliens exempt from FICA on certain visas
- Construction industry $200B wages FICA taxed 2022
Employment and Wage Statistics Interpretation
In the great American payroll tax circus of 2022, nearly everyone is a performer—from the self-employed lion tamers to the tipped waitstaff—all dutifully feeding the lion’s share of their earnings into a vast and intricate safety net, proving that when it comes to funding Social Security and Medicare, we're all on the same tightrope whether we're hitting the earnings cap or juggling multiple gigs.
Revenue Collected
- Total US payroll tax revenue from Social Security was $1.222 trillion in FY 2022
- Medicare payroll taxes contributed $368.5 billion to HI Trust Fund in 2022
- FICA withholdings totaled $1.55 trillion in 2022 per IRS data
- FUTA revenue collected $47.8 billion in FY 2022
- Social Security payroll taxes covered 90.1% of OASI income in 2022
- Employer share of FICA was $775 billion in 2021
- Self-employment tax revenue $144 billion in 2022
- Medicare payroll revenue grew 10.2% from 2021 to 2022
- SS payroll tax receipts up 14% in 2022 post-COVID recovery
- FUTA taxes deposited quarterly totaled $36.5 billion net in 2023 Q1-Q3
- Payroll taxes funded 88.4% of DI Trust Fund in 2022
- Total FICA + SECA revenue $1.6 trillion projected for 2023
- HI payroll taxes $389 billion in 2023 estimate
- SS OASI payroll $1.05 trillion, DI $144 billion in 2022
- Employer FUTA payments $24 billion annually average 2018-2022
- Additional Medicare Tax revenue $4.2 billion in 2022
- Payroll tax refunds for overwithholding $12 billion in 2022
- State UI taxes complement FUTA at $50 billion yearly
- SS payroll as % of GDP 4.1% in 2022
- Medicare payroll 1.5% of GDP in 2022
- FICA revenue per capita $4,650 in 2022
- Payroll taxes 32% of total federal tax revenue in 2022
- Quarterly FICA deposits averaged $380 billion in 2023
- SS tax revenue shortfall due to cap $150 billion annually
Revenue Collected Interpretation
America's workers and employers funded over a trillion dollars in Social Security checks, a quarter-trillion in hospital care, and a safety net for the unemployed last year, proving that the payroll tax is not just a line on your stub but the financial engine for fundamental promises.
Tax Rates and Caps
- In 2023, the Social Security payroll tax rate for employees and employers combined is 12.4% on wages up to the taxable maximum of $160,200
- The Medicare payroll tax rate is 1.45% each for employees and employers with no wage cap in 2023, totaling 2.9%
- Additional Medicare Tax of 0.9% applies to high earners above $200,000 single filer wages in 2023
- Social Security wage base increased to $168,600 in 2024 from $160,200 in 2023
- Self-employed individuals pay the full 15.3% FICA tax (12.4% SS + 2.9% Medicare) in 2023
- Federal Unemployment Tax Act (FUTA) rate is 6.0% on first $7,000 of wages per employee in 2023, with credits up to 5.4%
- In 2022, Social Security taxable maximum was $147,000, up 5.2% from $142,800 in 2021
- Medicare Part A payroll tax funds hospital insurance at 1.45% without cap since 1994
- Railroad Retirement Tier 1 payroll tax matches Social Security at 12.4% combined in 2023
- Tier 2 Railroad payroll tax employer rate is 16.50% on wages above Tier 1 base in 2023
- In 2021, SS wage cap was $142,800, affecting top 6% of earners
- FUTA wage base remains fixed at $7,000 since 1983
- Additional Medicare Tax threshold for married filing jointly is $250,000 in wages
- Social Security tax rate held at 6.2% employee share since 1990
- In 2020, wage base was $137,700 despite pandemic
- Self-employment tax deduction allows half of 15.3% as adjustment to income
- Hospital Insurance Trust Fund payroll tax rate unchanged at 2.9% since 1990
- FUTA net rate after credit averages 0.6% for most employers in 2023
- SS tax applies to cash tips over $20/month per employee
- Wage base for 2019 was $132,900
- Medicare tax on RRTA matches FICA at 2.9%
- SS tax rate temporarily increased to 4.2% employee share in 2011
- FUTA applies to domestic workers earning $1,000+ quarterly
- Additional Medicare Tax collected on Form 8959
- 2025 projected SS wage base $176,100
- In 2018, cap was $128,400
- Medicare tax withheld on wages over threshold regardless of filing status
- Tier 1 RRTA wage base matches SS at $160,200 in 2023
- SS tax exemption for certain ministers' wages
- FUTA credit reduced for state unemployment overpayments
Tax Rates and Caps Interpretation
American payroll taxes cleverly function as a system where most workers and their employers pay a uniform, capped fee for social security, while funding healthcare with an uncapped, graduated tax that asks a little more from high earners, reflecting a balance between universal contribution and modestly progressive responsibility.
Sources & References
- Reference 1SSAssa.govVisit source
- Reference 2IRSirs.govVisit source
- Reference 3RRBrrb.govVisit source
- Reference 4CBPPcbpp.orgVisit source
- Reference 5DOLdol.govVisit source
- Reference 6CMScms.govVisit source
- Reference 7FISCALfiscal.treasury.govVisit source
- Reference 8CBOcbo.govVisit source
- Reference 9BEAbea.govVisit source
- Reference 10OUIoui.doleta.govVisit source
- Reference 11TAXPOLICYCENTERtaxpolicycenter.orgVisit source
- Reference 12FEDERALRESERVEfederalreserve.govVisit source
- Reference 13EPIepi.orgVisit source
- Reference 14CENSUScensus.govVisit source
- Reference 15BLSbls.govVisit source
- Reference 16GAOgao.govVisit source
- Reference 17OPMopm.govVisit source
- Reference 18NCESnces.ed.govVisit source
- Reference 19SBAsba.govVisit source
- Reference 20VAva.govVisit source
- Reference 21ERSers.usda.govVisit source
- Reference 22CRFBcrfb.orgVisit source
- Reference 23ITEPitep.orgVisit source
- Reference 24KFFkff.orgVisit source
- Reference 25TAXFOUNDATIONtaxfoundation.orgVisit source