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Is FICA the Same as Social Security?

is-fica-same-social-security

Although there would be no social security or government sponsored disability insurance payments without the Federal Insurance Contributions Act (FICA), the two are not one and the same. Rather, they are, respectively, a piece of legislation signed into law in 1935 and a means of personal income taxation by which the benefits of that law are financed.

Social Security Act

The Social Security Act went into effect in January 1937. The first lump sum payment of social security benefits financed by payroll taxes was handed out that same month to an individual by the name of Ernest Ackerman, in the amount of 17 cents. Ongoing monthly social security benefits were instituted in January 1940, and the first person to receive those was Ida May Fuller. At the same time, the legislative provision under which payroll taxes were being collected to fund social security was changed, from the original Article VIII to a part of the Internal Revenue Code, under the FICA name, in 1939.

FICA Taxation Rate

The FICA taxation rate, half of which is paid for by employees and half of which is paid for by the employer (unless the person is self-employed, in which case they pay the entire amount), has risen incrementally from the original rate of 1% to, as of 1990, 6.2%. However, because of the complicated set of deductions, dependents and other tax year factors that can be claimed by an individual household, the effective rate of FICA in a given year my be higher or lower. For example, a typical U.S. family of four have been paying a FICA rate of 7.65% since 1990.

Through the end of the 2008 tax year , FICA has helped the U.S. government disburse an astonishing $11.7 trillion in social security benefits. During that same time, a total of $13.8 trillion in social security funds have been collected.

 

Resources

Social Security Online – History, Retrieved August 28, 210 from http://www.ssa.gov/history/hfaq.html

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

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