The authority under which the U.S. federal government collects a payroll tax contribution for Social Security benefits is the Federal Insurance Contributions Act, or FICA.
When the Social Security Act was enacted into law on August 14th, 1935 by President Franklin D. Roosevelt, the provisions for a related payroll tax were in a separate title (VIII). Four years later, in 1939, Title VIII of the law was transferred over to the purview of the Internal Revenue Service (IRS) and the Internal Revenue Code. At that point, the tax provisions for Social Security were officially renamed from Title VIII to FICA, to better reflect their new legislative body home.
The Social Security Act, which was spurred by the Great Depression and included other sweeping subsidized provisions such as the establishment of Unemployment Insurance compensation, was enforced beginning in tax year for 1937. The original rate of FICA taxation was 1%. In 1950, in what would turn out to be the first of a number of increases, that rate was raised to 1.5%. The following year, a separate, higher rate of 2.25% was instituted for those who are self-employed.
The periodic increases in FICA rates reflect both the gradual expansion of the Social Security Act and the need to cater to the needs of a retiree population that has grown proportionally larger. The types of employees subjected to FICA deductions was expanded in 1950; Disability Insurance was created in 1956; retirement at the earlier age of 62 was permitted beginning in 1961; and automatic Cost of Living Adjustments (COLAs) to FICA were introduced in 1972.
Social Security Online – History, Retrieved August 28, 210 from http://www.ssa.gov/history/hfaq.html
Social Security Online – FICA & SECA tax rates, Retrieved August 28, 2010 from http://www.ssa.gov/OACT/ProgData/taxRates.html
Social Security Reform Center – History of Social Security, Retrieved August 28, 2010 from http://www.socialsecurityreform.org/history/index.cfm
Tax Policy Center – Historical Social Security and FICA Tax Rates for a Family of Four, Retrieved August 28, 2010 from http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=227
Washington Post – “Groups Call for Alan Simpson’s Resignation Over ‘Sexist Letter'”, August 25, 2010, Retrieved August 28, 2010 from http://voices.washingtonpost.com/44/2010/08/group-calls-for-debt-commissio.html
ADP – About Us, Retrieved September 6, 2010 from http://www.adp.com/about-us.aspx