What do Social Security and Medicare taxes fund?

The correct choice is related to the funding of benefits under the Federal Insurance Contributions Act (FICA), which includes significant programs like Social Security and Medicare. These taxes are mandatory payroll deductions for most employees and their employers in the United States. Specifically, Social Security taxes provide retirement, disability, and survivor benefits, while Medicare taxes fund health insurance for individuals aged 65 and over, as well as certain younger individuals with disabilities.

Both Social Security and Medicare are critical components of the social safety net, ensuring that workers have access to necessary financial support during retirement or in the event of disability, as well as medical coverage in later years. The revenue collected from these taxes directly supports these federal programs, making the knowledge of FICA essential for understanding the responsibilities and services provided under U.S. law.

The context of the other options helps clarify why the correct answer stands out. State-level healthcare programs are typically funded through state taxes and not directly through FICA. Employee retirement accounts generally refer to private retirement savings and do not include the government’s Social Security program, which operates independently of individual retirement accounts. Local community development projects are unrelated to Social Security or Medicare funding, as those programs are focused on broader federal benefits rather than localized projects.