The amount of Social Security tax owed by both employees and employers is based on the amount of "wages" paid to employees. However, not all wages are subject to Social Security tax. There is an upper limit on the amount of an individual's wages that is subject to Social Security taxes, commonly referred to as the taxable wage base. An automatic escalator in the law increases this upper limit annually, and this figure is generally announced in the October of the year prior to the year it is to take effect.
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