A: The Social Security system is funded primarily by federal taxation of payrolls. All workers who are not self-employed currently pay 7.65 percent of their gross salary in Social Security taxes. The employer for these workers pays an additional 7.65 percent, for a total "payroll tax" of 15.3 percent of gross salary. In addition, self-employed workers are required to pay 15.3 percent of their self-employment income in payroll taxes, minus certain special deductions. The Social Security portion of this tax applies only to a limited amount of income; in 2005, this limit was $90,000. The limit is adjusted for inflation yearly, and the tax rate itself has been raised at irregular intervals over time. The combined tax rate has been 15.3 percent since 1990.

Last Updated 1/2/2006

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