The Treatment of Mandatory Tax Withholdings in Calculating AFDC Benefits: Fairness as a Relevant Inference in Ascertaining Congressional Intent

This Note contends that the more appropriate construction of the statute is to view mandatory tax withholdings as nonincome and nonwork expense items. Part I traces the pre-OBRA legislative and administrative history and examines the judicial interpretations of 42 U.S.C. section 602(a)(7) “income” and section 602(a)(8) “earned income.” It concludes that under the “availability” principle, tax withholdings have always been regarded as nonincome items distinct from work expenses. It contends that, notwithstanding contradictory language in the regulations implementing section 602(a)(8), the status of tax withholdings as nonincome items under section 602(a)(7) is controlling. Part II considers the legislative history and purposes of OBRA. It argues that the legislative intent is consistent with the exclusion of mandatory withholding taxes from the income considered in determining need. Finally, Part III demonstrates that inclusion of mandatory withholdings in the flat work expense disregard would result in unfair and unequal treatment of working recipients relative to nonworking recipients. It asserts that, absent a clear indication to the contrary, courts should presume that legislatures intend to treat similarly situated individuals equally in passing legislation.