Medicare and Social Security are Mandatory Spending categories funded by which type of taxes that are withheld from your Paycheck?

Medicare and Social Security are Mandatory Spending categories funded by which type of taxes that are withheld from your Paycheck?

The Correct answer is FICA

Medicare and Social Security are Mandatory Spending categories funded by taxes withheld from your paycheck known as FICA taxes. FICA stands for the Federal Insurance Contributions Act, and it mandates the collection of taxes to fund these important social safety net programs in the United States.

 

What is FICA?

FICA stands for the Federal Insurance Contributions Act. It's a United States federal law that mandates the collection of two separate taxes from employees and employers. These taxes fund the Social Security and Medicare programs, which provide benefits to retired and disabled individuals, as well as cover medical costs for eligible individuals.

The FICA tax includes two components:

1. Social Security Tax: This tax is used to fund the Social Security program, which provides retirement, disability, and survivor benefits. As of my last knowledge update in January 2022, the Social Security tax rate for employees is 6.2% of their income, up to a certain limit set by the government.
2. Medicare Tax: This tax is allocated to fund the Medicare program, which offers health insurance for individuals aged 65 and older, as well as certain younger people with disabilities. The Medicare tax rate for employees is 1.45% of their income, with no income cap.