The maximum amount of earnings on which a tax is calculated is a ___________.

The maximum amount of earnings on which a tax is calculated is referred to as the tax base. This indicates the total amount of income or revenue that is subject to taxation. Understanding the definition of the tax base is crucial for payroll accounting because it directly impacts how much tax is withheld from an employee’s earnings.

In this context, the tax base helps to delineate the threshold at which income becomes taxable and ensures taxpayers are aware of the income levels that are subject to taxation. This term encompasses various types of taxes, including income tax, social security tax, and Medicare tax, establishing clear guidelines for payroll calculations.