What tax is levied on wages and funds the Social Security program?

The correct answer is the Social Security tax, which is specifically designed to fund the Social Security program. This tax is part of the broader payroll tax system, which encompasses various taxes that are deducted directly from an employee's wages to support specific government programs. The Social Security tax is applied to a worker's earnings up to a certain income limit and is critical for providing benefits to retirees, disabled individuals, and survivors of deceased workers.

The reason this tax is singled out is that it directly contributes to the Social Security fund, which pays out benefits to those eligible based on their work history and contributions. While income tax and payroll tax encompass a wider range of deductions and contributions, it is the Social Security tax that specifically targets funding for the Social Security system.

Payroll tax, while encompassing the Social Security tax, also includes other taxes like Medicare, which supports healthcare for the elderly. Understanding the functions and implications of each type of tax illustrates how they fund different aspects of social programs and government services.