Glossary

Taxable wage base

The maximum amount of one worker's yearly wages that a given payroll tax applies to.

Above the wage base the tax stops for that worker until the next year begins. Federal unemployment tax uses $7,000; state unemployment bases are set by each state and range from that same $7,000 to several times it; Social Security has its own much higher annual ceiling. Because the bases are low relative to a full-time salary, unemployment taxes are typically paid off early in the calendar year, which makes first-quarter payroll cash flow heavier than an annual average suggests. Comparing states by tax rate alone is misleading — a low rate on a high base can cost more than a high rate on a low one.

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