What are payroll taxes and what does the President’s order do?
Payroll taxes consist of Social Security taxes and Medicare taxes. Every pay period, an employee pays 6.2% of their earnings for Social Security and 1.45% for Medicare taxes. Workers pay the 6.2% Social Security tax on annual earnings up to $137,700.
Meanwhile, the employer pays the same rate per paycheck, adding up to a combined 12.4% Social Security tax and 2.9% Medicare tax.
In late March, the $2.2 trillion CARES Act said employers could defer paying their share of the Social Security tax from March 27, when Trump signed the CARES Act, to the end of the year. They can pay back one half of the sum by the end of next year and the second half by the end of 2022.