Why Are Your Payroll Taxes So High?

Did you know the government deducts money out of every paycheck you get? Do you know where that money goes? Watch this short video on payroll taxes to learn more.

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Script:

If you have a job you might be wondering what all those deductions on your paycheck are.

When you’re just starting out in the workforce it’s important to learn the difference between gross pay and net pay. Gross pay is what you earned before deductions, like taxes. Net pay is what’s left in your check after all the deductions are taken out.

So who or what is FICA?

It is the Federal Insurance Contributions Act Tax, which is comprised of Social Security and Medicare taxes. It’s called a payroll tax because it takes money out of employees paychecks every pay cycle. FICA taxes are currently more than 7.5 percent of everyone’s paycheck until you reach a cap.

Employers pay an equal amount of FICA taxes for each employee. And even if you don’t pay any income taxes, you still pay FICA taxes.

Social Security taxes fund retirement benefits for retired workers, as well as benefits for the disabled and their dependents. The funds received for Medicare, on the other hand, are used to provide medical benefits for certain individuals when they reach age 65.

Workers, retired workers, and the spouses of workers and retired workers, are eligible to receive Medicare benefits once they reach retirement age.

So if you’re working, it’s your money that helps pay for those benefits. And it’s a lot of money too. In 2015, federal payroll taxes generated $1.07 trillion in revenue for the government, accounting for about one-third of all federal tax revenues.

[JaredHagen]

I still remember my first paycheck, I was so psyched I picked it up from my workplace went home, opened it up and was shocked, nearly half of it was missing, I knew there was some taxes that were going to be taken out but not that much. I remember my dad pointing out to me where it stated the amount taken out for Social Security, it was a really small amount maybe a dollar or two, and I remember him telling me that more likely than not I will not see that money again, and that's the day I became a conservative.

[njmudaliar]

Social Security should be optional. If I want to save privately I should be free to

[MarineMike]

All that revenue the government takes every year from every worker and we still have a 20 trillion dollar debt.

[outlawgaviez]

Why can't the government not take tax out of my pay check and i will invest in my own retirement

[sharpie]

My gross pay is awesome but my take home is shit. A large portion of my income is from overtime which I get taxed at a higher rate. I pay like a 35%-40% once I add up all that I pay in taxes including property tax. I feel like I'm getting screwed.

[josiahjohnson]

FICA pisses me off to no end. Why in the hell should I have to give up part of my paycheck to the government for SS just so they can give it back in fifty years? It's asinine. Let me keep the money, and if I'm not responsible enough to save for retirement, then that sucks for me. I don't see how that's the government's problem

[UserNotFound-mwhp]

why are taxes so high? in a word ....Democrats.

[michaelragaee]

The bigger the government, the smaller the citizen!

[tMattM]

Social security is theft. Cash out and opt out. I can worrry about saving for retirement myself thank you very much.

[ChrisP]

The title seems wrong.
Instead of "Why Are Your Payroll Taxes So High?" it should be "What are the deductions on your paycheck?"

[wowfrosted]

Have a part time job while at college. I'll make 500 bucks but only see 340 of it. Do you realize what 160 could do for me as a student and consumer?

[Recovering_Californian]

Fun Fact: If you're self employed you have to pay both your share AND the "employer's" share.

[doormanfoc]

The issue with these taxes is what happens when someone dies before collecting the benefits they paid for? Answer: the government keeps the money and uses it on things other than what it was original intended to be use on, which is basically If a person dies before collecting the full benefits that they paid the government to have then the government should technically reimburse the heirs of the deceased the portion of benefits the deceased had yet to receive.

[rustyscrapper]

On the sample pay stub with earnings of $1200 there was a deduction for income tax of $120, and the others $17 and $74. Just so Americans know, in Canada if my pay was $1200 the income tax deduction would be about $400, EI $60 and CPP $150. Canada is currently about a 60% tax bracket country when you include everything. Oh then your 40% leftover gets carbon taxed.

[robroth]

Was unaware that employers "pay" a share in FICA. That's sneaky. Average Joe sees that as "fair"
Libertarian Larry knows they just end up paying employees less or hiring fewer employees to offset.

[jesusimpersonator]

This is one of the few Uprager videos I liked. Keep making more like this, with less opinion and more facts.

[jiffyb]

Why is there a cap? Shouldn't those who make more money pay the same percentage as the lower income worker?

[Nick-ynuz]

0:41 No, the rate is just the same for each employee, not the amount. It's important to be clear with the language you use because people can easily be mislead.

[MrSirFluffy]

Keep your old art style Prager U, don't change it. It gives your channel a personality/style.

[guyzan]

What!? in my social country we pay only 3.5% fica tax until you reach a step, from there you pay 12%