How to Read a Paystub

How to read a paystub.

The employee earned $853.91 over two weeks.

Federal Witholding was $36.00. Another term for this is Federal income tax.

State Withholding was $28.00. Another term for this is Montana State income tax.

Social Security Employee was $52.94. This is money that goes to retired people. Many retirees are better off than this employee. (I, the employer, had to write a check for $52.94 and send both halves to the Treasury, $105.88.)

Medicare Employee was $12.39. This money buys health insurance for retirees, many of whom are wealthy. Retirees have better health care insurance, Medicare, than many of the workers who are paying the Medicare taxes. (I, the employer, had to write a check for $12.39 and send both halves to the Treasury, $24.78.)

Together, Social Security and Medicare deductions, in this case $65.33 total, are called the employee’s “Payroll Taxes.” If you are self-employed, say as a house painter or weekend mechanic, you have to pay both halves of the Payroll Tax.

Full size paystub

Full size paystub

Where do Federal Income taxes get spent? Of the $36.00:

Defense:                                       $12.96

Income Security, (Welfare, not Social Security):                        $9.36

Interest:                                    $5.30

Other:                                          $5.04

Education                                   $1.80

Environment                             $.61

International affairs:              $.61

(Spending by the State of Montana is not shown here.)

This is where the money goes. Is it worth it? Only the taxpayer can say.

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