The act passed to collect resources specifically to pay for Social Security and Medicare is the Federal Insurance Contributions Act (FICA). FICA is the payroll tax law under which wage and salary earnings up to a certain amount are taxed to fund Social Security and Medicare programs. Social Security is funded primarily through these payroll taxes collected under FICA, and Medicare's hospital insurance expenses are also paid with payroll taxes, including an additional Medicare payroll tax added in 1966. To detail:
- The original Social Security Act was passed in 1935, which established Social Security.
- Medicare benefits were added as part of Social Security with the Medicare program starting in 1965.
- An accompanying Medicare payroll tax of 0.7% was added in 1966 to help fund Medicare.
- Social Security and Medicare are funded mainly by payroll taxes collected under FICA (Federal Insurance Contributions Act).
- The Social Security tax applies to earnings up to a legally set limit, and the Medicare tax applies to all earned income (with some recent increases for higher earners).
In summary, the payroll taxes mandated by the Federal Insurance Contributions Act (FICA) are the key legislation passed to collect funds used to pay for Social Security and Medicare benefits.
