Both payroll taxes and income taxes are based on an employee’s wage or salary. The main difference between each tax is who end up paying the tax. Employers pay most of an employee’s payroll taxes while just the employee pays the income taxes. Both taxes end up coming from employee’s salary. Typically in America, employees end up paying more payroll taxes than they do income taxes. This paper is going to look at the differences between payroll taxes and income taxes and will also explain what “wage shifting” is and when it occurs.
Payroll taxes are taxes that employers and employees pay to the federal government from an employee’s salary. The amount of payroll taxes paid comes from a percentage of the salary that employers pay to their staff.
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At the lowest level of employment such as minimum wage employers must pay a set payroll tax per employee they hire. In order off set this burden on employer, employers attempt to reduce the salaries they pay to their employees. Since employers cannot reduce the amount they pay to employees at the minimum wage level, they end up reducing the number of employees they hire. This is what is known as “wage shifting”. Basically payroll taxes at this level cannot be shifted to minimum wage employees because their wages cannot be lowed to a level that offsets the burden of the tax. This causes a problem for low wage workers in attempting find work because getting hired causes a burden on employers, which they are not willing to pay.
In conclusion, the difference between payroll tax and income tax is the person that ends up paying that tax. Employers pay payroll taxes, while the employee pays income tax. Wage shifting occurs when employers attempt to shift the burden of the payroll tax on to employees. Yet at the minimum wage level employers cannot lower wages any further and as a result they end up hiring less
Filing and payment – Individual income tax on employment income is subject to withholding, payment and reporting by the employer. Payment is due by 25th of the month following the month the income was paid. Income and tax should be reported on a quarterly basis by the 15th of the second month following the reporting quarter.
Introduction: In the year 1862 during the civil war congress implemented the first income tax in America. It was 3% per year. However, it was not until 1913 when the 16th Amendment to the Constitution was passed, which granted the government the ability to impose a tax on individuals’ income. Since then it has been an issue to determine how much people should be taxed. Tax rates in America change drastically; for example, in 1963 a person in the highest tax bracket would give 90.8% of their income to the government. In contrast, that same person would only pay 28.0% in 1988. The tax rate for income tax is an issue because for every dime that someone pays in taxes is one dime that they are not able to spend themselves. Additionally, people
Tax law changes every year. Laws are updated, loopholes are blocked and other modifications are generated. A few of these changes affect essentially each of the wage earners while others could impact primarily small businesses or higher-income taxpayers.
This paper will take a close look at the concepts of the "flat tax," and look at the possible benefits and potential failings. Although there is a basic format to the flat tax, there are multiple flat tax proposals that have been offered by conservatives. Along with critiquing the basic format of the flat tax, this paper will compare an...
The average tax costs for an employer is 6.2% and the average costs for an employee is 4.2%. Employers usually have more to give in terms of taxes because they have higher Net income,
In a progressive system of taxation, there is a greater portion of personal income that gets taxed at certain income levels. Someone making $25k per year, for example, may have a 10% tax rate on this income. Someone earning $50k per year would pay 10% taxes on the first $25k they earned, but then 15% on the remainder of the amount. In the United States, the top tax rate typically hovers around 35%.
The war in pay inequity in the United States has been raging since the 1940s. This paper is focused on the pay differences among men, women, and mothers and why it exists. The government has made strives to close the income wage gap between men and women, however it still exists and must be dealt with. Among women, deciding to bear children has greatly impacted earnings potential, retirement, and career choices. As more women decide to go to college and earn degrees, there is still a disparity in income in the labor market. Forty percent of the pay gap that exists cannot be explained by occupation, race, or experience.
Taxation has always been a major controversy. Just like any major corporation, the government is constantly looking to raise revenue. The easiest and fairest way to do this is by taxing the people. However, how the people will be taxed is always an issue.
Taxes in the United States include payroll taxes, property taxes, sales taxes, and a multitude of others. These taxes may be imposed on individuals, business entities, estates, trusts, or other forms of organizations. In general, there is a lot of inquiry on the current tax system. With endless loopholes, a regressed economy, and corruption there has been widespread anger on the current structure of taxation. Consequently, the wealthy have managed to become even richer despite the economic crisis. Furthermore, many taxpayers in the upper class have found loopholes to avoid substantial taxation or otherwise known as tax evasion. (Stewart 2013) Tax evasion has only grown over the years and with the national debt has become a major issue. What is more, is the intense complexity of the entire taxation process. Addressing all the issues and problems regarding the taxation structure is a meticulous and arduous process. With this in mind, politicians from both parties have tried to address individual issues within the taxation paradigm. Being that the United States has the highest corporate tax in the globe, politicians have tried to change policy regarding taxation on businesses. (Sullivan 2013) How...
Gender Pay Gap also referred to as Gender wage gap, gender income difference or male-female income difference refers to the difference between the earning of men and women (Victoria, 2006). The European Union defines the Gender Pay gap as the difference between men and women’s hourly earnings (OECD, 2012). The difference may be measured on hourly, weekly, monthly, or yearly earning. The difference is expressed as a percentage of the men’s earning. However, the difference varies from one industry to another, from one country to another and from one age group to another. On average, men earn higher than women do across different sectors and nations.
Thirdly I noticed that government effects how much money is deducted out of the paycheck I receive at work. The government deducts money for many different programs. One of those is the social security program. The social security program is made up of money deducted from everyone's pay this money is distributed when the employee becomes disabled, retires, or passes away. The money is there to protect the worker and their families if that person is no longer able to work. The government also takes money out of my pay for Medicare, Medicare is a program that provides medical care for people that can not afford it. There is also a federal income tax that is deducted and used for a various assortment of programs from road paving to bridge building and many other public needs.
With ever increasing prices on commodities and scarcer jobs, hard work alone is not enough to pay the bills when they are due. Imagine that you are stuck out in the ocean. The waves are pounding and every time a wave rolls in you are sucked in underneath. After surfacing you only have 15 seconds to catch your breath before the next wave hits. Over time your body starts to give out, 15 seconds is not nearly enough time to recover between each wave. You can only hold on for so long before your lungs give out and you are permanently sucked in underneath. This is what living on minimum wage feels like. People work so hard for money that barely covers their basic needs. Minimum wage is those precious 15 seconds of air that you get. It barely keeps you afloat. Americans need help to keep afloat, and the government could remedy the situation by adding more seconds(increasing minimum wage), so to speak, so that a person does not have to barely hold on, and actually make enough money to live
Entin, Stephen. J. (2004). Tax Incidence, Tax Burden, and Tax Shifting: Who really pays the tax? Retrieved January 24, 2008 from http://www.heritage.org/research/taxes/cda04-12.cfm
Wage differentials are the different rates of pay for the same general type of work, due to a variety of reasons such as differences in performance. Marginal productivity is the difference in how much a worker produces compared to another. There are many reasons for the difference in wages within an industry such as the amount of risk involved, the amount of human capital the individual has and the differences in productivity and amount contributed to the firm. These are just three of many reasons for differences in wages rather than just marginal productivity. There are also external reasons for wage differences that may have nothing to do with individual’s
A tax, as defined by the Taxation UWI text book, is a legal obligation to pay a certain percentage of income or profits to government imposed on taxpayers, that is, any person or organization required by law to pay tax. Legal penalties would be forced upon taxpayers for failure to make tax payments.