Social Security and Medicare are funded by taxes on which of the following?

• A. Capital gains
• B. Payroll income
• C. Corporate profits
• D. Sales of goods and services

Answer: (B)

Verified step by step guidance

1. Understand the nature of Social Security and Medicare programs: these are social insurance programs primarily designed to provide income and health benefits to retirees and certain other groups.
2. Recognize that these programs are funded through specific types of taxes, not general taxes like sales taxes or corporate taxes.
3. Identify that the primary source of funding for Social Security and Medicare is the payroll tax, which is a tax on wages and salaries earned by workers.
4. Recall that payroll taxes are collected from both employees and employers based on the income earned from labor, not from capital gains or corporate profits.
5. Conclude that among the options given, 'Payroll income' is the correct source of funding for Social Security and Medicare.