Question

Briefly explain the purpose served by payroll taxes and how they are collected. Describe any comment that economists point out with regard to payroll taxes. TT T Arial 3 (12pt) T !!!

Answer 1

Taxes which are paid on the salaries and wages of employees are known as payroll taxes. The main purpose of these taxes is to finance social insurance programs, like Medicare and Social Security. These taxes are sometimes deducted from the salaries of employees and at certain times paid by the employer. Payroll tax is collected by withholding a certain amount from the salaries of the employees and is paid to the government. Economists generally believe and comment that it is advisable not to cut payroll taxes because high payroll ltaxes would lead to strengthening of social security.