The Social Security payroll tax is known as ____________ tax.

The Social Security payroll tax is known as FICA tax, which stands for the Federal Insurance Contributions Act. This tax is levied on earnings to fund Social Security and Medicare programs. When employees receive their paychecks, a portion of their earnings is withheld as FICA tax, which is then used to provide benefits such as retirement, disability, and health insurance for eligible individuals.

The correct answer reflects a critical component of the United States social safety net, as FICA contributes directly to funding essential services that benefit workers and their families. Understanding FICA is important for anyone involved in the insurance industry, as it relates to the financial and social security landscape that impacts insurance and retirement planning.

Other options mentioned do not pertain to the payroll tax specifically. SEDI refers to specific employer reporting requirements, SSDI stands for Social Security Disability Insurance which benefits those unable to work due to disability, and PAYGO relates to budgetary principles of ensuring that new spending is offset by cuts or increased revenue. Each serves a distinct purpose but does not describe the payroll tax on earnings collected under FICA.