Social Security (United States)

In the United States, Social Security is the commonly used term for the federal Old-Age, Survivors, and Disability Insurance (OASDI) program. [1] The original Social Security Act was signed into law by President Franklin Roosevelt in 1935, [2] and the current version of the Act, as amended, [3] encompasses several social welfare and social insurance programs.

Social Security is funded primarily through payroll taxes called Federal Insurance Contributions Act tax (FICA) or Self Employed Contributions Act Tax (SECA). Tax deposits are collected by the Internal Revenue Service (IRS) and are formally entrusted to the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, the two Social Security Trust Funds. [4] [5] With a few exceptions, all salaried income, up to an amount specifically determined by law (see tax rate table below), is subject to the Social Security payroll tax. All income over said amount is not taxed. In 2017, the maximum amount of taxable earnings was $127,200. [6]

With few exceptions, all legal residents working in the United States now have an individual Social Security number. Indeed, nearly all working (and many non-working) residents since Social Security's 1935 inception have had a Social Security number because it is required to do a wide range of things, e.g., paying taxes and getting a job.

In 2015, Social Security expenditures totaled $750.5 billion for OASDI and $146.6 billion for DI. [7] Income derived from Social Security is currently estimated to have reduced the poverty rate for Americans age 65 or older from about 40% to below 10% [8] The Social Security Administration is headquartered in Woodlawn, Maryland, just west of Baltimore.

History

Historical Social Security Tax Rates
Maximum Salary FICA or SECA taxes paid on [9]

Year
Maximum
Earnings
taxed
OASDI
Tax rate
Medicare
Tax Rate
Year
Maximum
Earnings
taxed
OASDI
Tax rate
Medicare
Tax Rate
1937 3,000 2% - 1978 17,700 10.1% 2.0%
1938 3,000 2% - 1979 22,900 10.16% 2.1%
1939 3,000 2% - 1980 25,900 10.16% 2.1%
1940 3,000 2% - 1981 29,700 10.7% 2.6%
1941 3,000 2% - 1982 32,400 10.8% 2.6%
1942 3,000 2% - 1983 35,700 10.8% 2.6%
1943 3,000 2% - 1984 37,800 11.4% 2.6%
1944 3,000 2% - 1985 39,600 11.4% 2.7%
1945 3,000 2% - 1986 42,000 11.4% 2.9%
1946 3,000 2% - 1987 43,800 11.4% 2.9%
1947 3,000 2% - 1988 45,000 12.12% 2.9%
1948 3,000 2% - 1989 48,000 12.12% 2.9%
1949 3,000 2% - 1990 51,300 12.4% 2.9%
1950 3,000 3% - 1991 53,400 12.4% 2.9%
1951 3,600 3% - 1992 55,500 12.4% 2.9%
1952 3,600 3% - 1993 57,600 12.4% 2.9%
1953 3,600 3% - 1994 60,600 12.4% 2.9%
1954 3,600 4% - 1995 61,200 12.4% 2.9%
1955 4,200 4% - 1996 62,700 12.4% 2.9%
1956 4,200 4% - 1997 65,400 12.4% 2.9%
1957 4,200 4.5% - 1998 68,400 12.4% 2.9%
1958 4,200 4.5% - 1999 72,600 12.4% 2.9%
1959 4,800 5% - 2000 76,200 12.4% 2.9%
1960 4,800 6% - 2001 80,400 12.4% 2.9%
1961 4,800 6% - 2002 84,900 12.4% 2.9%
1962 4,800 6.25% - 2003 87,000 12.4% 2.9%
1963 4,800 7.25% - 2004 87,900 12.4% 2.9%
1964 4,800 7.25% - 2005 90,000 12.4% 2.9%
1965 4,800 7.25% - 2006 94,200 12.4% 2.9%
1966 6,600 7.7% 0.7% 2007 97,500 12.4% 2.9%
1967 6,600 7.8% 1.0% 2008 102,000 12.4% 2.9%
1968 7,800 7.6% 1.2% 2009 106,800 12.4% 2.9%
1969 7,800 8.4% 1.2% 2010 106,800 12.4% 2.9%
1970 7,800 8.4% 1.2% 2011 106,800 10.4% 2.9%
1971 7,800 9.2% 1.2% 2012 110,100 10.4% 2.9%
1972 9,000 9.2% 1.2% 2013 113,700 12.4% 2.9%
1973 10,800 9.7% 2.0% 2014 117,000 12.4% 2.9%
1974 13,200 9.9% 1.8% 2015 118,500 12.4% 2.9%
1975 14,100 9.9% 1.8% 2016 118,500 12.4% 2.9%
1976 15,300 9.9% 1.8% 2017 127,200 12.4% 2.9%
1977 16,500 9.9% 1.8%
Notes:
Tax rate is the sum of the OASDI and Medicare rate for employers and workers.
In 2011 and 2012, the OASDI tax rate on workers was set temporarily to 4.2%
while the employers OASDI rate remained at 6.2% giving 10.4% total rate.
Medicare taxes of 2.9% now (2013) have no taxable income ceiling.
Sources: Social Security Administration [10] [11]

Social Security Timeline [12]

  • 1935 The 37-page Social Security Act signed August 14 by President Franklin D. Roosevelt. Retirement benefits only to worker, welfare benefits started
  • 1937 First Social Security Cards issued by post offices, over 20 million issued in first year
  • 1937 Ernest Ackerman receives first lump-sum payout (of 17 cents) in January. [13]
  • 1939 Two new categories of beneficiaries added: spouse and minor children of a retired worker
  • 1940 First monthly benefit check issued to Ida May Fuller for $22.54
  • 1950 Benefits increased and cost of living adjustments (COLAs) made at irregular intervals – 77% COLA in 1950
  • 1954 Disability program added to Social Security
  • 1960 Flemming v. Nestor. Landmark U.S. Supreme Court ruling that gave Congress the power to amend and revise the schedule of benefits. The Court also ruled that recipients have no contractual right to receive payments.
  • 1961 Early retirement age lowered to age 62 at reduced benefits
  • 1965 Medicare health care benefits added to Social security – 20 million joined in three years
  • 1966 Medicare tax of 0.7% added to pay for increased Medicare expenses
  • 1972 Supplemental Security Income (SSI) program federalized and assigned to Social Security Administration
  • 1975 Automatic cost of living adjustments (COLAs) mandated
  • 1977 COLA adjustments brought back to "sustainable" levels
  • 1980 Amendments are made in disability program to help solve some problems of fraud
  • 1983 Taxation of Social Security benefits introduced, new federal hires required to be under Social Security, retirement age increased for younger workers to 66 and 67 years
  • 1984 Congress passed the Disability Benefits Reform Act modifying several aspects of the disability program
  • 1996, Drug addiction or alcoholism disability benefits could no longer be eligible for disability benefits. The Earnings limit doubled exemption amount for retired Social Security beneficiaries. Terminated SSI eligibility for most non-citizens
  • 1997 The law requires the establishment of federal standards for state-issued birth certificates and requires SSA to develop a prototype counterfeit-resistant Social Security card – still being worked on.
  • 1997 Temporary Assistance for Needy Families, (TANF), replaces Aid to Families with Dependent Children (AFDC) program placed under SSA
  • 1997 State Children's Health Insurance Program for low income citizens – (SCHIP) added to Social Security Administration
  • 2003 Voluntary drug benefits with supplemental Medicare insurance payments from recipients added
  • 2009 No Social Security Benefits for Prisoners Act of 2009 signed.

A limited form of the Social Security program began, during President Franklin D. Roosevelt's first term, as a measure to implement " social insurance" during the Great Depression of the 1930s, when poverty rates among senior citizens exceeded 50 percent. [14] The Act was an attempt to limit unforeseen and unprepared for dangers in the modern life, including old age, disability, poverty, unemployment, and the burdens of widow(er)s with and without children.

Opponents, however, decried the proposal as socialism. [15] [16] [17] In a Senate Finance Committee hearing, Senator Thomas Gore (D-OK) asked Secretary of Labor Frances Perkins, "Isn't this socialism?" She said that it was not, but he continued, "Isn't this a teeny-weeny bit of socialism?" [18]

The provisions of Social Security have been changing since the 1930s, shifting in response to economic worries as well as coverage for the poor, dependent children, spouses, survivors and the disabled. [19] By 1950, debates moved away from which occupational groups should be included to get enough taxpayers to fund Social Security to how to provide more benefits. [20] Changes in Social Security have reflected a balance between promoting "equality" and efforts to provide "adequate" and affordable protection for low wage workers. [21]