Theme 2: Taxes in U.S. HistoryLesson 4: The Social Security Act of 1935
Millions of Americans were unemployed during the Great Depression. President Roosevelt's New Deal created some new jobs, but many elderly people could not work and were living in poverty. The President asked Frances Perkins, the first female cabinet member, to develop an "old-age" insurance program. The resulting Social Security Act of 1935 was designed to provide elderly retired workers with pensions.
At first, payments into Social Security were considered "contributions," not taxes. The program appeared to be self-funded--as workers contributed, they received credits toward retirement benefits. However, too many people needed help, so the program was expanded to include the families and survivors of retired and disabled workers, the unemployed, and federal workers.
Today, Social Security provides a regular income to retired and disabled workers and the unemployed. Social Security is funded by a compulsory payroll tax called the Federal Insurance Contributions Act (FICA) tax. The payroll tax is withheld from each paycheck. Withholding means that an employer deducts, or holds back, a set amount of money and sends it to the government. Workers pay the tax as they earn their incomes. This system is known as "pay-as-you-go" or "pay-as-you-earn." Workers' payroll taxes support those who are currently receiving Social Security benefits.
Activity 1: All in Favor Say Aye Who favors Social Security? Who opposes Social Security? You decide.
Activity 2: Calculating Taxes Calculate FICA/payroll taxes for individuals in 1937 and 2000.
Activity 3: How are Social Security Numbers Assigned? Take a virtual field trip to learn how Social Security numbers are assigned.
Complete the assessment page to test your understanding of The Social Security Act of 1935.
Would you like to know more about Social Security and how it affects your paycheck? Check Hows of Taxes: Module 1 Payroll Taxes and Federal Income Tax Withholding to find out how FICA taxes are currently deducted. Go to Social Security Online for the complete text of the Social Security Act of 1935.
What is the purpose of the FICA tax?
Did You Know?
The Social Security Administration has collected the names and addresses of millions of Americans born since 1880. In the late 1990s, the Administration published online lists of the most popular first names for American men and women in the twentieth century.
Test your tax trivia knowledge by answering the multiple-choice question. Click on the correct answer. To assess your answer, click the Check My Answers button.
Visit Social Security Online to find the most popular names for boys and girls the year that you were born.
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