One possible solution to a diminishing Social Security payroll is to increase the Social Security tax by 1.89%. How would such an increase effect the tax on an annual salary of $54,000?

Question

a.
Annual tax would increase by $1,020.60.
b.
Annual tax would increase by $2,327.40.
c.
Annual tax would increase by $3,348.00.
d.
Annual tax would increase by $4,368.60.

Answer 1

To calculate the increase in annual tax, multiply the annual salary by the increase in the Social Security tax rate:

Increase in annual tax = $54,000 * 0.0189

Increase in annual tax = $1,018.60

Therefore, the correct answer is:
a. Annual tax would increase by $1,020.60.