Which of the following statements about the financing of the Social Security program is (are)true?
I.Although the self-employed pay an OASDI tax rate that is twice the employee rate,they are allowed certain deductions that reduce the effective tax rate.
II.The earnings base on which OASDI taxes are paid increases annually based on changes in average wages in the national economy.

Question

Quizplus · Accepted Answer

Statement I is true as self-employed individuals pay both the employee and employer portions of the OASDI tax, which is currently set at a combined rate of 12.4%. However, they are allowed certain deductions such as the deduction for one-half of self-employment tax, which reduces their effective tax rate. Statement II is also true as the Social Security Administration adjusts the earnings base each year based on changes in average wages in the national economy. This year, the earnings base is $142,800, up from $137,700 in 2020, due to an increase in average wages.

Which of the Following Statements About the Financing of the Social