What is an example and the implication of a payroll tax?

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pohnpei397 eNotes educator| Certified Educator

Payroll taxes are taxes that every business that has employees must withhold from the paychecks that those employees get.  These are taxes that are automatically taken from the paycheck.  Two examples of such taxes are Social Security taxes and Medicare taxes.  If you get a paycheck, you can look on it and you will see that you have had money withheld for these things.

The implication of this is that all people have to pay these taxes, regardless of how much money they make.  These are not income taxes where you only pay if you make a certain amount of money and where richer people pay a higher percentage.  Instead, there are actually lower payroll taxes for richer people (percentage-wise) because people who make over a certain amount of money no longer have to pay the taxes on the money that they make over and above a certain level.  Liberals tend to argue that this is not fair because these taxes end up being regressive.  That means that poorer people have to pay higher percentages of their incomes in these taxes.