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The portion of the Federal Insurance Contributions Act (FICA) tax paid by employers is 7.65 percent and the portion paid by employees is 7.65 percent
The portion of the Federal Insurance Contributions Act (FICA) tax paid by employers is 7.65 percent and the portion paid by employees is 7.65 percent (for a total of 15.3 percent). Suppose that absent FICA taxes, workers would have received a competitive equilibrium wage of $10.11 per hour. With FICA taxes divided equally between employers and employees, the actual market wage is $9.54 per hour. What is the incidence of the FICA tax? (Note: At the new market wage of $9.54 per hour, employers pay $0.73 in FICA taxes and workers pay $0.73 in FICA taxes for a total of $1.46.) As compared to the wage of $10.11 per hour that would have prevailed without FICA taxes, workers pay percent of the FICA tax and employers pay percent of this tax. (Enter your responses rounded to one decimal place.)
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