Social Security turned 75 this year, having paid its first beneficiaries in 1937. It was conceived under the Social Security Act of 1935 and was established to provide an income to those who had worked and were at least 65 years old.
Since then, Social Security has expanded to make payments to the worker’s family members (if divorced or disabled) and to the disabled. (This is a relatively small but still significant part of the program.) In dollar terms, it is the largest government program in the world and the single greatest expenditure in our federal budget.
Social Security is funded through payroll or FICA taxes on income: 12.4 percent of every dollar earned up to an inflation-adjusted cap ($110,100 in 2012).
The income tax is its much more famous cousin, given its IRS enforcement and annual April 15 filing deadline. Payroll taxes on income generally are withheld from one’s check, making them a lot less obvious.