Source: Andrew Morris, Studies in American Political Development, Volume 29 Issue 1, April 2015
From the abstract:
Payroll taxes and payroll deductions became ubiquitous in the United States by the mid-1940s, crucial to the financing of the emerging “mixed” welfare state as well as World War II. While scholars have firmly established the importance of elements of the warfare/welfare state such as Social Security, employer-based pensions and health insurance, and the mass income tax, voluntary sector institutions have garnered less attention. The history of payroll deduction demonstrates how this “infrastructural power” also advantaged institutions outside of the state, notably, charitable fundraising organizations commonly known as Community Chests (the forerunners of the United Way). Chests began to look toward the payroll deduction in the 1920s as an efficient and effective way of extracting donations from workers of modest means—though these were often fiercely resisted by an empowered labor movement in the 1930s. But it took the state’s vast expansion of deductions during World War II, and the patriotic impulse of donating to war-related charities, to convince industrial unions and employers to support this method of donation. Like the income tax, this change in charitable giving remained in place after the war and became a vital element of financing this part of the public–private social safety net—a crucial boost to the voluntary sector from the state.