ECONOMICSPay Checks

Pay Checks

On every pay check there are always a lot of different numbers that are grouped with letters or acronyms.

There is a difference between what you make in total, known as earned or gross income and what you take-home, known as net income pay.

Pay Checks, continued

In almost all cases, the net pay is less then the gross amount.

Generally speaking, when money is taken out of a pay check it is called a deduction.

Deductions

There are two different kinds of deductions or categories:

Taxes

Benefits

Taxes

Taxes are monies paid to the federal, state, or local governments.

They are better known as federal income tax, state income tax and local income tax.

Taxes

FICA: Federal Insurance Contributions Act. This money pays for social security, disability insurance, and hospital insurance.

Taxes

Federal Income tax pays for programs run by the federal government.

For example: all government officials salaries, government agencies and departments, the defense budget, foreign aid, national highways, like route 95, etc.

Taxes

State income taxes pay for programs run by each state in the country.

For example: salaries of state officials, state agencies and department, state police, state highways, public education, etc.

Taxes

Local taxes pay for program run by local governments.

For example: salaries of local officials, local roads, local police, and trash removal, etc.

Benefits

A second form of deductions are called benefits.

Benefit deductions can include things like: health and dental coverage, retirement savings, holiday clubs, union dues, and investments.