On August 14, 1935, the Social Security Act was signed into law by President Franklin D. Roosevelt.
The Social Security Act was passed basically as the result of difficult economic times during the Great Depression.
While some think it will be bankrupt soon, the fund is still solvent and paying out!
Under the new law, workers who lost their jobs received payments called “unemployment compensation.” There were other parts of the Act that also provided the elderly, those in need, certain minors and handicapped folks with public aid.
Initially, the Social Security Tax was a 2% tax that was levied on the first $3000.00 of an employee’s wages or salary.
Then 50% was taken directly out of the employee’s paycheck and the other 50% was paid by the employer on behalf of the employee.
As we're seeing today, the problem with this kind of entitlement plan is because of the "public aid" part you see in bold above, over time - a ton more money is drawn out of the plan than is paid in and the kitty ends up BROKE!
Taxes During World War II
Before even entering World War II, in 1940 to support opponents of Axis aggression and raise defense spending revenue, the United States passed two more tax laws that raised both corporate and individual taxes, and followed that one year later with another tax increase in 1941.
By the time the war was over, the basic nature of the income tax had essentially changed; exemption levels were now reduced such that now the highest tax rate was 94% for individuals with taxable incomes over $1 million and the lowest tax rate was 23% for those with taxable incomes of $500.
Federal tax receipts ballooned five fold from 1941 to 1945 as the result of these tax changes.
As a percentage of GDP, federal taxes almost tripled from 1941 to 1945, going from 7.6% to 20.4% - even with a war-time economy.
In addition to the tax rates and tax revenues, another very significant increase was in the number of taxpayers, which also expanded by over ten times to 45 million in 1945, up from just 4 million in 1939.
One other significant change during this time was that just like during the Civil War, the income tax would again be withheld. This made it a lot easier for both the Bureau of Internal Revenue and the taxpayer. Although an offshoot of this change was that it would now be easier for the government to raise future taxes because taxpayers didn’t notice the taxes being collected as much as they did before.
Back To "Taxes Through World War 1 And The Great Depression"
The entry of the United States into World War I greatly increased the need for revenue and Congress responded by passing the 1916 Revenue Act. The 1916 Act raised the lowest tax rate from 1 percent to 2 percent and raised the top rate to 15 percent on those with incomes in excess of $1.5 million...
After World War II and a number of income tax cuts, the Federal tax burden as a percentage of GDP went from a wartime high in 1944 of 20.9% back down to 14.4% in 1950. However, with the Korean War and the extension of Social Security, requiring even more revenues, by 1952, the tax burden returned back up to 19% of GDP...