The Social Security tax is a payroll tax that was started by the United States Government in the 1930s. This tax is imposed upon working people and their employers. Before the Great Depression, the working class in America found themselves with several financial difficulties.

At that time, if a person was not able to work, he had no way of supporting himself or his family. This was true for the elderly, as well as those who were sick or injured. Government health insurance for the elderly did not exist, and without income, most individuals would not be able to pay for medical care or even the daily expenses of living for themselves or their families. If for any reason a worker had not been able to save money on his own throughout his life, once he became too old to work, his income would end.

This would all change in 1935, when President Franklin D. Roosevelt signed the Social Security Tax Act into law. At that time, workers and their employers were taxed equally at a rate of 2% each. Over time, that amount has increased to 6.2% of wages, with the matching 6.2% being paid by the employer. For workers who are self-employed, 15.3% of their income must be paid as Social Security tax.

In 1965, this government tax was increased to pay for an expansion known as Medicare. This new program was established to provide healthcare benefits to US citizens who are 65 years of age or older. It also covers those people who meet specific requirements before that age.

All monies collected through the Social Security tax are placed into a fund where they distributed accordingly. Several different groups of individuals benefit from this fund. If someone becomes disabled, they will receive a monthly income from the Social Security tax. If a parent with children under the age of eighteen dies, each of their children will receiver a monthly income known as survivor benefits until their eighteenth birthday. Retirees also benefit from the social security tax; after reaching retirement age, an individual would receive a monthly income from the Social Security tax.

The Social Security tax ensures that every American citizen will have some type of income, even if they become disabled or they become too old to work. Medicare ensures health coverage for these same individuals.