- The United States uses a progressive income tax, which simply means that those workers who earn more pay a higher percentage of their incomes in federal income taxes than those who earn less. Married taxpayers whose total household incomes are $17,000 or less fall into the lowest tax bracket, which currently stands at 10 percent. This $17,000 limit encompasses all minimum wage workers. Single minimum wage workers who work full time find themselves in the 15 percent tax bracket, which includes incomes from $8,501 to $34,500 per year.
- All workers, even those making the minimum wage, are subject to the payroll tax used to fund the Social Security program for older workers and the disabled. The normal tax rate for Social Security is 6.2 percent of wages, but for 2011 only that rate has been lowered to 4.2 percent. This 2 percent reduction in the Social Security payroll tax was part of the tax cut compromise worked out between Congress and President Obama at the end of 2010. The Social Security payroll tax is scheduled to go back to its 6.2 percent level in 2012.
- Minimum wage workers are also subject to the 2.9 percent Medicare tax used to pay the health care expenses of senior citizens and the disabled. This tax is listed on your pay stub as Medicare, and you can find the total amount of Medicare taxes paid by looking at the Medicare taxable wages and Medicare tax blocks on your W-2 form.
- In addition to the taxes imposed by the federal government, most states also impose an income tax on their workers. The rates vary from state to state, as do the earnings subject to that tax. Some states use a tiered income system similar to what the federal government uses. Those states impose a higher tax on those who earn more. Other states use a flat income tax, meaning that all workers pay the same percentage of their income toward the operation of the state, regardless of how much or how little they earn.
Federal Income Tax
Social Security Tax
Medicare Tax
State Income Taxes
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