The government’s been in a hullabaloo of imposing taxes. With the increased demands and decrease supply, the Government is looking for a panic button to coup with the crisis. After imposing a tax on home heating oil, tax on labor and on other stuff, they have finally reached the department of payroll. So in this post, we are going to discuss, what would most likely happen if the government increased payroll taxes.
What are Payroll Taxes?
Payroll taxes involve employees and employers. The tax is omitted from the employee’s salary by the employer. The collected tax is then submitted to the government. Either the employee is on a daily or monthly wage or any sort of tip, all categories lie in the tax bracket. The employer then submits the tax to the Internal Revenue Service (IRS). The reality is that despite dividing the payroll tax between employee and employer, the employees pay almost the complete payroll taxes. This is a major flaw that needs to have a look by the government. how much tax does an employer pay
Payroll Tax vs Income Tax
Although both are the part of taxes, both generate a hefty amount and add the collected income to the government’s revenue reservoir.
Payroll Tax is composed of taxes that are based on Medical and social security. Payroll taxes come under the umbrella of FICA which stands for the Federal Insurance Contributions Act. FICA tax includes both the employer and employees, both are obliged to contribute and report to FICA.
While on the other hand, Incomes tax is a federal-driven tax. It means that the IRS collects Income tax which the only employee pays except some. Few states have omitted these taxes from their state like Texas.
How much tax employer should pay?
The employer is obligated to conduct these few operations of paying the taxes to the IRS. They are as follows:
- Payroll tax involves two-way involvement. Both the employee and employer must pay the payroll taxes. The employer should make sure to pay their share to the IRS.
- For depositing tax dollars withheld from the employees’ paychecks.
- Preparing various reconciliation reports.
- Managing reports related to Accounting, Invoicing and the payroll total expenses with regard to financial capability.
- Filling documentation for tax returns.
Tax Rates of Employer
- Social Security taxes (6.2 percent up to the annual maximum)
- Medicare taxes (1.45 percent of wages)
- Federal unemployment taxes (FUTA)
- State unemployment taxes (SUTA)
What would most likely happen if the government increased payroll taxes?
Increasing the federal payroll tax rate is alarming. The outcomes would be that the workers would have less money to take home each week if the government increased payroll taxes. And this situation is very critical. If the public takes less money home each week or month, they would be deprived of many necessary facilities. And the unemployment rate would reach to the top. You must calculate the payroll tax before auditing.
So the conclusion would be that increasing the payroll simultaneously increases the inflation rate alongside unemployment would also jump up to the peak. The employees are already under many taxes, also in the payroll taxes mostly the employer burdens its own share on the employees, so it’s the employee only who becomes the bait of taxes.