In December 2012, Congress did not renew the Payroll tax holiday and so the Soci
ID: 3146790 • Letter: I
Question
In December 2012, Congress did not renew the Payroll tax holiday and so the Social Security rate rose from 4.2% to 6.2%. The result of this was anyone who received a pay check in January 2013 noticed an increase in their Social Security deduction when compared to the deduction in the previous month, December 2012. If Lannay earns $1215 per pay period, how much more Social Security will she pay per pay period in 2013? It's reasonable to assume that Lannay will not reach the maximum taxable earnings for Social Security or Medicare. Round your answer to the nearest penny and do not include the $ sign
Explanation / Answer
Assuming that Lannay earned $1215 after social security deduction. Her pay prior to deduction is -
X - (4.2% of X) = 1215
X - (0.042X) = 1215
X = 1215/0.958 = 1268.27
New deduction = 6.2%
Therefore, her new pay is -
1268.27 - (6.2% of 1268.27) = 1189.64
Increase in social security = 1215 - 1189.64 = 25.36
She will pay 25 dollars and 36 cents more