Tuesday, 16 July 2013

Taxable Payroll and Payroll Tax Rates

library Peter Orszag

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

© TAX ANALYSTS. Reprinted with permission.

In 1966, when payroll taxes for Medicare's Hospital Insurance (HI) program began to be collected, the taxable payroll base was identical to that under the Old-Age, Survivors, and Disability Insurance (OASDI) program and the tax rate was less than a tenth of OASDI's. While the payroll tax rates for both programs have increased since 1966, the HI rate has risen faster. The HI rate is now almost one-quarter of the OASDI rate generated more rapid wage growth above the cap than below it in the 1990s will persist in the future.)

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