First Payroll Deductions by the Federal Government

No, the first payroll deductions didn’t start withholding for Social Security in January 1937 or income tax, which started in 1943 with quarterly payments. They began when President John Adams signed The Act for the Relief of Sick and Disabled Seamen on July 16th, 1798.

Earlier, in March 1798, the Congress authorized the use of force against France which had, in 1796 begun issuing letters of marque to allow privateers seize U.S. ships. Thus, beginneth the Quasi War with France which lasted officially between July 7th, 1798, and September 20th, 1800, with the signing of the Convention of 1800.

Back in 1798, there was no Veterans Administration or any government entity in the new United States to provide care for sailors who were disabled in the service of their country. Remember, this act was passed almost four years after the Navy Act of 1794, which established the modern U.S. Navy.

Adams was very cognizant of the risks of serving on square-rigged ships. Estimates vary, but most historians put Patriot casualties from the American Revolution at 6,800 KIA, 6,100 WIA, and another 17,000 who died from disease. However, some experts put the total dead at 75,000! Add in another 130,000 who died from smallpox, and it is a very big number.
Another reason behind the bill was that it was a recruiting tool, i.e., we – the government – will take care of you if you become sick or disabled in the service of your country. Pensions after so many years of service were already in place.

The Act for the Relief of Sick and Disabled Seamen requires the ship’s captain, master, or owner to deduct 20 cents/month from the pay of each member of the crew. The second part of the act states that failure to comply will result in fines and loss of license. In other words, the ship cannot either load or unload cargo in a U.S. port.
Section three of the act requires those who collect the deductions must deposit the funds with the U.S. Secretary of the Treasury on a quarterly basis.

In the fourth section, the President of the United States is directed to use the collected funds to create hospitals and infirmaries in U.S. ports. The fifth section of the act authorizes the President to appoint directors who will report to him on how the funds are being used.

This act was used as justification/precedent for later legislation that deducts money from our salaries and wages.

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