Why is severance pay taxed at a higher rate?

Severance pay is taxed at a higher rate primarily due to how it's classified by tax authorities. In many jurisdictions, severance pay is considered a supplemental wage, which is subject to different tax withholding rules compared to regular income. These rules often mandate a higher percentage of tax withholding on severance payments, ensuring that sufficient taxes are paid upfront. The exact tax rate can vary based on local tax laws and the total amount of severance received.