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Let Us Cut Through The RNC /Cato/Heritage Alliance Lies
About Social Security And FDR

THE INITIAL TEN YEAR PERIOD WAS TO BE THE RAMP UP TO A PRE-FUNDED SYSTEM.

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Between 1942 and 1947, the Social Security payroll tax rate increase
was postponed seven times. It was not until 1950 that the 1% Social Security
tax rate was allowed to rise to 1.5%.

1. The Revenue Act of 1942, P.L. 753 (H.R. 7378, 77th Congress) was signed
by President Roosevelt on October 21, 1942. It provided that for calendar
year 1943, the payroll tax rate for old-age and survivors benefits would
be frozen at the existing rate of 1% for employees and employers, each,
instead of being increased to 2% on each as otherwise would have been
required.

2. P.L. 211, (H.J. Res. 171, 78th Congress), a joint resolution regarding
the Tariff Act, signed by President Roosevelt on December 22, 1943, froze
the payroll tax at the 1% rate until March 1, 1944. The purpose of the
resolution was to give Congress time to consider the scheduled payroll
tax increase before it went into effect.

3. The Revenue Act of 1943, P.L. 235 (H.R. 3687, 78th Congress), was vetoed by President Roosevelt on February 22, 1944; the veto was overridden by the House on February 24, 1944 and by the Senate on February 25, 1944. The bill deferred the scheduled payroll tax increase (from 1 to 2%) until 1945.

P.L. 235 also contained an amendment by Senator Murray (D-MT) that authorized
the use of general revenues if payroll taxes were insufficient to meet
Social Security benefit obligations. Senator Murray stated that the amendment
merely stated in law what had been implied in the Senate Committee report.
Senator Vandenberg (R-MI) replied that the amendment “has no immediate
application, it has no immediate menace, it contemplates and anticipates
no immediate appropriation; but as the statement of a principle, I agree
with the amendment completely.”⁽⁴⁶⁾ The
amendment passed by voice vote.⁽⁴⁷⁾ The
“Murray-Vandenberg” general revenue provision was repealed in 1950, when
the tax rate was increased.

4. The Federal Insurance Contributions Act (FICA) of 1945, P.L. 495 (H.R.
5564, 78th Congress), signed by President Rooseve1t on December 16, 1944,
froze the payroll tax rate at 1% until 1946 and scheduled the payroll
tax rate to rise to 2.5% for the years 1946 through 1948, and to 3% thereafter.

5. The Revenue Act of 1945, P.L. 214 (H.R. 4309, 79th Congress), signed
by President Truman on November 8, 1945, deferred the tax rate increase
until 1947.

6. The Social Security Amendments of 1946, P.L. 719 (H.R. 7037, 79th
Congress), signed by President Truman on August 10, 1946, deferred the
tax rate increase until 1948.

7. The Social Security Amendments of 1947, P.L. 379 (H.R. 3818, 80th
Congress), signed by President Truman on August 6, 1947, continued the
freeze on the tax rate increase until 1950 and provided that it would
rise to 1.5% for 1950-51 and to 2% thereafter.

Members who favored these payroll tax freezes argued that the Social Security reserves were adequate and that benefit payments in the immediate future could be met with the current payroll tax rate. In a 1942 letter to the Senate Finance Committee, President Roosevelt said that “a failure to allow the scheduled increase in rates to take place under the present favorable circumstances would cause a real and justifiable fear that adequate funds will not be accumulated to meet the heavy obligations of the future and that the claims for benefits accruing under the present law may be jeopardized.” He also stated that “expanded Social Security, together with other fiscal measures, would set up a bulwark of economic security for the people now and after the war and at the same time would provide anti-inflationary sources for financing the war.”
⁽⁴⁸⁾
Members who were opposed to
the freeze argued that the scheduled payroll tax increase was important
for the long-term soundness of the OASI trust fund and that postponing
the tax increase would mean higher payroll tax rates in the future and
perhaps Government subsidies to meet obligations. Some proponents of the
freeze maintained that the Administration wanted the tax increase to retire
the public debt accumulated by wartime expenditures.