Michael, I forget: are you a contractor or a W-2 employee?
"Payroll tax" is way too vague for me; Max was talking about both sides of these two "taxes" ... there's a limit for FICA and not for Midicare, so I tend to think about them separately (though it doesn't matter for the $40k/yr example, since the FICA limit is $87k). There is at least one other Federal "payroll tax" but it's only paid by the employer (or the individual, if self-employed): FUTA, the Federal Unemployment Tax, which is between 0.8% and 6.2% depending on some wacky set of formulae, but is usually 0.8% -- on the first $7,000 of wages: $56 is the maximum, though I can't for the life of me figure out how it could make sense to collect it.
To make it super clear, the amount of "tax" paid when a W-2 employee has a "$40k gross salary" is $6,176; $56 of FUTA, and then half of what's left comes out of the $40k and is paid by the employee; the other half is paid by the employer and, expense-wise, is _on top of_ the $40k gross paid to the employee. A $40k gross payroll "costs" $40k + $3,060 + $56 = $43,116 to a company -- Federal; State numbers change this too. On top of this, of course, is any Federal Income Tax the employee may have to pay; Your Schedule A May Vary.
> This on-purpose deceptive slippage between taxes people pay on
> income and "income taxes" in the technical sense is a great gag ;o)
I guess; there's only one Federal "Income Tax" ... there are other taxes, however. The "Income Tax" is pretty progressive at this point (and getting moreso); now we just need to make progress on the progressiveness of the FICA and Medicare taxes. I'd like to see FICA be some percentage of income above $N and below $M where N > $25k and M < $150k or something like that.