Cite as: 532 U. S. 200 (2001)
Opinion of the Court
This case concerns the proper FICA and FUTA tax treatment of the 1994 payments. Under FICA, both employees and employers must pay tax on wages to fund Social Security and Medicare; under FUTA, employers (but not employees) must pay tax on wages to fund unemployment benefits. For purposes of this litigation, the Government and the Company stipulated that the settlement payments awarded to the players qualify as "wages" within the meaning of FICA and FUTA. The question presented is whether those payments, characterized as back wages, should be taxed by reference to the year they were actually paid (1994), as the Government urges, or by reference to the years they should have been paid (1986 and 1987), as the Company and its supporting amicus, the Major League Baseball Players Association, contend.
In any given year, the amount of FICA and FUTA tax owed depends on two determinants. The first is the tax rate. 26 U. S. C. §§ 3101, 3111 (FICA), § 3301 (FUTA). The second is the statutory ceiling on taxable wages (also called the wage base), which limits the amount of annual wages subject to tax. § 3121(a)(1) (FICA), § 3306(b)(1) (FUTA). Both determinants have increased over time. In 1986, the Social Security tax on employees and employers was 5.7 percent on wages up to $42,000; 1 in 1987, it was 5.7 percent on wages up to $43,800; 2 and in 1994, 6.2 percent on wages up to $60,600.3 Although the Medicare tax on employees and employers remained constant at 1.45 percent from 1986 to 1994,4 the taxable wage base rose from $42,000 in 1986 to $43,800 in 1987,5 and by 1994, Congress had abolished the
1 26 U. S. C. §§ 3101(a), 3111(a), 3121(a)(1); 51 Fed. Reg. 40256, 40257 (1986).
2 §§ 3101(a), 3111(a), 3121(a)(1); 50 Fed. Reg. 45558, 45559 (1985).
3 §§ 3101(a), 3111(a), 3121(a)(1); 58 Fed. Reg. 58004, 58005 (1993).
4 §§ 3101(b), 3111(b).
5 26 U. S. C. § 3121(a)(1) (1982 ed.); 51 Fed. Reg. 40256, 40257 (1986); 50 Fed. Reg. 45558, 45559 (1985).
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