JUSTICE BLACKMUN delivered the opinion of the Court.
This litigation concerns the proper computation of benefits to working recipients of Aid to Families with Dependent Children (AFDC), provided pursuant to subch. IV, pt. A, of the Social Security Act of 1935 (Act), as amended, 42 U. S. C. § 601 et seq. Specifically, we must decide whether, in calculating a household's need, the responsible state agency is to treat mandatory tax withholdings as a work expense encompassed within the flat-sum disregard of § 402(a)(8)(A)(ii) of the Act, 42 U. S. C. § 602(a)(8)(A)(ii), or whether the agency is to deduct such sums in determining "income" under § 402(a)(7)(A) of the Act, 42 U. S. C. § 602(a)(7)(A). The latter interpretation, of course, would accrue to the benefit of the recipient.
Before 1981, § 402(a)(7) of the Act required the state agency responsible for calculating a family's eligibility for AFDC benefits to "take into consideration any . . . income and resources of any child . . . claiming aid," as well as any
In response to these amendments, petitioner Secretary of Health and Human Services advised the responsible state agencies that mandatory payroll deductions were to be included in the new $75 work-expense disregard and that this disregard was to be taken from gross rather than net income. The State of California promptly issued regulations implementing these directions;
Respondents, a class of all past, present, and future California AFDC recipients who have been or will be affected by the changes wrought in the AFDC program by OBRA, brought this action in the United States District Court for the Northern District of California to challenge the California regulations implementing the Secretary's directions. They contended that the regulations misconstrued the term "income" in § 402(a)(7) to mean gross income, and thereby incorrectly relegated mandatory payroll deductions to the work expenses covered by the flat-sum disregard of § 402(a)(8); instead, according to respondents, they were entitled to have these mandatory payroll items disregarded by the State when
The District Court agreed with the plaintiff class. It therefore granted respondents' motion for summary judgment, as well as the State's motion for summary judgment against the Secretary. The court enjoined the State from implementing its new regulations and the Secretary from terminating federal matching funds due the State. Turner v. Woods, 559 F.Supp. 603 (1982).
On appeal, the United States Court of Appeals for the Ninth Circuit affirmed. Turner v. Prod, 707 F.2d 1109 (1983). Finding the statutory language unhelpful, it scrutinized the legislative history and the administrative interpretation of the two statutory provisions before relying primarily on "congressional purpose" to conclude that § 402(a)(7) "income" had always been net income after deduction of amounts mandatorily withheld for payment of social security, federal, state, and local taxes. Therefore, it concluded, the substitution of the flat-sum disregard of § 402(a)(8) for the work-expense disregard of § 402(a)(7) had had no effect on the independent deduction of tax withholdings in determining need.
The other Courts of Appeals to address the issue have concluded that Congress intended the flat work-expense disregard of § 402(a)(8) to encompass mandatory payroll withholdings, and that "income" for purposes of § 402(a)(7) was gross income.
"The AFDC program is based on a scheme of cooperative federalism." King v. Smith, 392 U.S. 309, 316 (1968). Established by Title IV of the Social Security Act of 1935, 49 Stat. 627, "to provide financial assistance to needy dependent children and the parents or relatives who live with and care for them," Shea v. Vialpando, 416 U.S. 251, 253 (1974), the federal program reimburses each State which chooses to participate with a percentage of the funds it expends. § 403, 42 U. S. C. § 603. In return, the State must administer its assistance program pursuant to a state plan that conforms to applicable federal statutes and regulations. § 402, 42 U. S. C. § 602. Among these provisions are the two relevant here — § 402(a)(7), which requires consideration of "income" for purposes of determining need, and § 402(a)(8), which requires the State to disregard certain sums from a recipient's income in making that determination.
This amendment, in its turn, created a new problem. Because "families with working members incurred certain employment-related expenses that reduced available income but were not taken into account by the States in determining eligibility for AFDC assistance," the Social Security Board soon "recognized that a failure to consider work-related expenses could result in a disincentive to seek or retain employment." Shea v. Vialpando, 416 U. S., at 259. To avoid defeating the purpose of the Act to encourage employment even where it did not wholly eliminate the need for public assistance, ibid.; see § 401, 42 U. S. C. § 601, the Board encouraged the State, in determining a family's need, to take account of the additional incidental expenses encountered by a working person.
In 1962, Congress converted this administrative prompting into a statutory requirement. It amended § 402(a)(7) to
The statute again was amended, effective July 1, 1969, to alter fundamentally the statutory treatment of earned income. Social Security Amendments of 1967, Pub. L. 90-248, § 202(b), 81 Stat. 881. Instead of merely protecting against the possibility of a disincentive, Congress moved to create an affirmative incentive to employment by adding several new deductions, or earned-income disregards. While it left intact the language of § 402(a)(7), requiring the State to take into account both a family's "income and resources" and "any expenses reasonably attributable to the earning of any such income," the amended version subjected this requirement to a new provision, § 402(a)(8). In part, the new section required the State, in computing income for purposes of determining need, to disregard the first $30 of "earned income" in any month, "plus one-third of the remainder of such income for such month." 81 State. 881.
In response to the new section, the Department of Health, Education, and Welfare, which, as successor to the Social Security Board and predecessor of the Department of Health and Human Services, was then administering the AFDC program, issued regulations defining "earned income" for purposes of § 402(a)(8), and incorporating the new disregards into the benefit calculations. "Earned income" was defined as the "total amount" of "commissions, wages, or salary," and calculated "irrespective of personal expenses, such as income-tax deductions. . . ." 45 CFR § 233.20(a)(6)(iv) (1970).
In 1981, by OBRA, Congress again significantly altered the treatment of work expenses. As noted above, in place of the requirement of § 402(a)(7) that the State consider expenses "reasonably attributable" to the earning of income, Congress substituted in § 402(a)(8) a child-care disregard of up to $160, and a flat $75 disregard, "in lieu of itemized work expenses." S. Rep. No. 97-139, p. 435 (1981). In addition, Congress restricted the "$30 plus one-third" disregard to the first four months of a recipient's employment, § 402(a)(8)(B)(ii)(II), 42 U. S. C. § 602(a)(8)(B)(ii)(II), and reduced its impact by requiring that the calculation be made after the work-expense and child-care disregards had been subtracted, § 402(a)(8)(A)(iv), 42 U. S. C. § 602(a)(8)(A)(iv).
In determining how Congress intended these tandem provisions to operate, we look first, as always, to the language of the statute. North Dakota v. United States, 460 U.S. 300, 312 (1983). We do not find this language, as informed by the structure and pattern of amendment of the relevant provisions, as unhelpful as did the Court of Appeals.
Among those disregards is the flat sum of $75 monthly. § 402(a)(8)(A)(ii). As the congressional Reports accompanying
The administrative background against which the OBRA Congress worked also supports the conclusion that mandatory tax withholdings were among the items Congress intended to include within the flat-sum disregard of § 402(a)(8)(A)(ii). Until 1962, there was no statutory or regulatory requirement that the States disregard work-related expenses in assessing a working recipient's income, although the successive federal agencies responsible for the AFDC program urged the States to do so as a matter of sound administrative practice. It appears that virtually all States acceded to that urging, at least to the extent of deducting mandatory tax withholdings, although practices varied widely as to other types of expenses. See App. 30-36, Bureau of Public Assistance, Social Security Administration, Department of Health, Education, and Welfare, Public Assistance Report No. 43: State Methods
The addition of the work-incentive disregard in 1967, however, made it necessary to detail the steps in the determination of need. In response, HEW promulgated detailed regulations on the application of these disregards to earned income. As noted above, one regulation, which has remained unchanged since its initial promulgation, defined "earned income" to mean
Another regulation — which has also remained unchanged, though after OBRA it no longer applied to AFDC calculations — set forth the procedure by which the disregards would be applied:
The second regulation, echoing the terminology of the first, clearly treated mandatory tax withholdings as "personal"
Administrative practice reflected the taxonomy of the regulations. Sometime after 1962, but well before the OBRA Congress acted, many States had come to treat tax withholdings as expenses "reasonably attributable to the earning of . . . income." A 1972 HEW study reported that virtually every State subjected mandatory payroll withholdings to the work-expense provision of § 402(a)(7). See App. 47, Department of Health, Education, and Welfare, Memorandum, Assistance Payments Administration, Social and Rehabilitation Service (Feb. 1, 1972). The Colorado program under consideration in Shea was said to treat mandatory payroll deductions as "expenses reasonably attributable to employment," 416 U. S., at 254-255, and the Shea Court assumed as much, id., at 255. And, in 1977, the House Committee on Government Operations received a comprehensive report on the AFDC program which appeared to indicate that all of the 43 States that responded to the inquiry treated mandatory tax withholdings as deductible work expenses. Congressional Research Service, Administration of the AFDC Program: A Report to the Committee on Government Operations 98 (Comm. Print 1977).
There is no reason to suppose that the Congress that enacted OBRA legislated in ignorance of the then generally accepted categorization of mandatory tax withholdings as work expenses. To the contrary, the Senate Report described Congress' understanding of existing law:
It is unlikely that Congress would have omitted so important an independent step as the disregard of tax liabilities. Instead, the parenthetical mention of child-care expenditures presages their treatment in the revised § 402(a)(8) as the only type of work expense separately disregarded.
The House Conference Report describes the new provisions to the same effect:
Again, we find it implausible that Congress would have provided an otherwise complete description of the proposed calculation, yet neglect to mention that "earnings" or "monthly earnings" did not include mandatory tax withholdings.
We acknowledge that the legislative history of the 1962 amendments, which codified the administrative policy that a state agency take account of work expenses in determining need, does not mention mandatory tax withholdings. See S. Rep. No. 1589, 87th Cong., 2d Sess., 17-18 (1962); H. R. Rep. No. 1414, 87th Cong., 2d Sess., 23 (1962). It is also true that in amending its guide to the States in response to the 1962 amendment of § 402(a)(7), HEW did not include such withholdings in its list of expenses reasonably attributable
The Court of Appeals recognized that "if mandatory payroll deductions enter into income at all, they must be treated as work-related expenses subject to the $75 ceiling enacted by OBRA, because no separate disregard for payroll withholdings exists." 707 F. 2d, at 1120. It avoided this conclusion, however, by rejecting its premise. According to the Court of Appeals, mandatory tax withholdings always had been excluded from the calculation of a working recipient's income by virtue of a long-enshrined principle of "actual availability," which, independently of any explicit statutory disregards, governed the definition of "income" for purposes of § 402(a)(7). Therefore, the substitution of the flat $75 disregard of § 402(a)(8) for the work-expense disregard of § 402(a)(7) had no effect on the treatment of tax payments,
We disagree. Contrary to the conclusion of the Court of Appeals, the principle of actual availability has not been understood to distinguish the treatment of tax withholdings from that of other work expenses. Rather, it has served primarily to prevent the States from conjuring fictional sources of income and resources by imputing financial support from persons who have no obligation to furnish it or by overvaluing assets in a manner that attributes nonexistent resources to recipients.
The availability principle traces its origins to congressional consideration of the 1939 amendments to the Act. At that time, some Members expressed concern, specifically with regard to the old-age assistance program, that state agencies not assume financial assistance from potential sources, such as children, who actually might not contribute. See 3 Hearings Relative to the Social Security Act Amendments of 1939 before the House Committee on Ways and Means, 76th Cong., 1st Sess., 2254 (1939) (statement of A. J. Altmeyer, Chairman, Social Security Board); 84 Cong. Rec. 6851 (1939) (statement of Rep. Poage). Shortly after passage of the 1939 amendments, the Board adopted a policy statement applicable to various aid programs, including AFDC. See App. 17-20, Social Security Board Memorandum (Dec. 20, 1940). The statement cautioned the States that in effecting the new statutory directive to take into account a recipient's "income and resources," they must ensure that any such income or resources "actually exist," be not "fictitious" or "imputed," and "be actually on hand or ready for use when it is needed." A short time later, this policy statement was incorporated in substantially the same form in the Board's guidelines to the States, see App. 21-23, and successive federal agencies administering the AFDC program have continued to endorse the principle. See, e. g., HEW Handbook of Public Assistance Administration, pt. IV, § 3131.7
This Court, too, has viewed the actual availability principle "clearly [to] comport with the statute," King v. Smith, 392 U. S., at 319, n. 16, and has not hesitated to give it effect in that case and others. See Lewis v. Martin, supra; Van Lare v. Hurley, 421 U.S. 338 (1975). But the Court's cases applying the principle clearly reflect that its purpose is to prevent the States from relying on imputed or unrealizable sources of income artificially to depreciate a recipient's need. For example, in King v. Smith the Court considered the actual availability regulation in holding that Alabama could not deny assistance to otherwise eligible children solely on the basis of their mother's cohabitation with a "substitute father," not their own, without regard to whether the putative substitute actually contributed to the children's support. 392 U. S., at 319-320, and n. 16.
The failure of the federal agencies administering AFDC to apply the availability principle to distinguish mandatory tax withholdings is not surprising. The sums they consume are no less available for living expenses than other sums mandatorily withheld from the worker's paycheck and other expenses necessarily incurred while employed. In implicit recognition of this analytic difficulty, the Court of Appeals, without helpful explanation,
The Court of Appeals, however, thought it "clear that the agency charged with the administration of this statute has long regarded it as dealing with net income exclusively." 707 F. 2d, at 1115. To support this conclusion, it cited the then-current regulation embodying the availability principle,
Thus, it is apparent that the net amount to which the regulation refers is that remaining after AFDC disregards, not simply payroll withholdings.
Finally, even accepting the view of the Court of Appeals that § 402(a)(7) "income" does not encompass mandatory tax withholdings, one reaches a much more limited result than respondents seek. In the face of the straightforward regulatory definition of "earned income" and Congress' reemployment of that term in reworking the § 402(a)(8) disregards, it is clear that the flat-sum disregard is to be deducted from total earned income, including mandatory tax withholdings, as provided by § 402(a)(8) and its implementing regulations. The putative rule excluding tax withholdings as "non-income items" under § 402(a)(7) income would also take total earnings as its starting point. Thus, the benefits each provides would be duplicative until deductions exceeded $75. Respondents' understanding of § 402(a)(7) would simply require the state agency to permit recipients to deduct the greater of either actual payroll deductions or $75. No party urges this construction, of course, because it would have been a senseless and cumbersome way for Congress to achieve such a result. But, for us, it demonstrates the implausibility of respondents' view of the interplay of § 402(a)(7) and § 402(a)(8).
Notwithstanding its conclusion that the actual availability principle had always governed the treatment of mandatory tax withholdings in calculating an AFDC family's need, and
See Shea v. Vialpando, 416 U. S., at 253. While acknowledging the cost-cutting focus of the OBRA amendments, the Court of Appeals reasoned that its construction best accommodated what it saw as the competing purposes of the 76th and 97th Congresses. First, citing the elimination after the first four months of employment of the $30 and one-third, work-incentive disregard, which it regarded as OBRA's "chief economizing feature," as well as the imposition of a cap on the child-care and work-expense disregards, the court opined that other changes in the statutory disregards fully accomplished any budgetary savings intended by the OBRA Congress. Next, it reasoned that the unchanged statement of statutory purpose compelled its construction, which still resulted in a disincentive to employment, because it produced a lesser disincentive than that effected by the Secretary's regulations. Finally, seeing "no reason to believe that AFDC recipients will work in order to pay handsomely for the privilege," it decided that in the long term the OBRA Congress' desire to reduce welfare expenditures would best be accomplished by avoiding or minimizing financial penalties on employed recipients. 707 F. 2d, at 1123.
We agree with the Court of Appeals that the OBRA Congress neither changed the language of the AFDC statement of purpose nor abandoned the statutory goals. We also
During the House hearings on the OBRA changes to the AFDC statute, Representative Stark voiced concern that the new scheme would put a working mother to the distressing choice of either quitting her job or making do with less money to devote to her family's needs. See Administration's Proposed Savings in Unemployment Compensation, Public Assistance, and Social Services Programs: Hearings before the Subcommittee on Public Assistance and Unemployment Compensation of the House Committee on Ways and Means, 97th Cong., 1st Sess., Ser. No. 97-7, p. 3 (Comm. Print 1981). Representative Rangel feared that "[t]he marginally poor, actually penalized . . . for working, would have a great disincentive to continue to work." Id., at 41. Other Members and numerous private witnesses issued similar warnings. See, e. g., id., at 26 (Rep. Russo); id., at 46 (Rep. Chisholm); id., at 318 (Kevin M. Aslanian, Welfare Recipients League, Inc.). And the report of the Congressional Budget Office, included in the Senate Report, expressly called Congress' attention to the possibility that the work-expense cap and temporal limitation on the work incentive disregard would "increase the work disincentives found in the current AFDC program." S. Rep. No. 97-139, at 552.
Indeed, the concerns which underlay the decision of the Court of Appeals in this case prompted the House Subcommittee on Public Assistance and Unemployment Compensation to draft a version of § 402(a)(8) which would have increased substantially the flat work-expense disregard. The Subcommittee proposed to allow a work-expense deduction of the lesser of 20% of earned income or $175. See 127 Cong. Rec. 14476 (1981). But the House rejected this version and, instead, passed a substitute identical to that passed by the Senate. See id., at 14681-14682; H. R. Conf. Rep. No. 97-208, at 978-979. Again, Members sounded warnings of the consequences of the administration substitute. See 127 Cong. Rec. 14104 (1981) (Rep. Rostenkowski); id., at 14663-14664 (Rep. Biaggi). These concerns, however, did not deter the OBRA Congress.
Instead, as the Court of Appeals for the Third Circuit has observed, the legislative history indicates that, "[h]aving determined that providing financial incentives for work was not achieving the goal of self-sufficiency and that such incentives were leading to ever-increasing public expenditures. Congress embarked on a new course." James v. O'Bannon, 715 F. 2d, at 809. In proposing to limit the $30 and one-third disregard to the first four months of employment, for example, the Senate Budget Committee expressed impatience that the program then in effect was not inducing AFDC mothers to achieve self-sufficiency. S. Rep. No. 97-139, at 502-503. As a result, Congress sought other means that, in combination with the now temporally limited work-incentive disregard, might "decrease welfare dependency, and emphasize the principle that AFDC should not be regarded as a permanent income guarantee." Ibid. It chose to authorize the States to establish programs aimed at promoting employment
Thus, it is clear that the OBRA Congress elected to pursue unchanged goals by new methods. By concluding that Congress could not have intended to include mandatory tax withholdings in the new $75 disregard because such a rule would dilute financial incentives to work, the Court of Appeals ignored the congressional choices manifest in the departure from approaches previously favored.
Were there any doubt remaining as to Congress' intention in 1981, subsequent congressional action would dispel it. In the immediately succeeding session, certain Members of the
We take great care, of course, before relying on the understandings of Members of a subsequent Congress as to the actions of an earlier one, but we by no means eschew what guidance they offer. Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 117-120, n. 13 (1980); Cannon v. University of Chicago, 441 U.S. 677, 686-687, n. 7 (1979). Here, we face the considered statements of a Committee whose Members were in the thick of the fight over earned-income disregards in the preceding session of the same Congress. And those statements clearly reveal the
The most recent confirmation of Congress' intentions in this matter came with enactment of the Deficit Reduction Act of 1984, Pub. L. 98-369, 98 Stat. 494, which, by its § 2625, 98 Stat. 1135, amends § 402(a)(8) to provide that "in implementing [the section], the term `earned income' shall mean gross earned income, prior to any deductions for taxes or for any other purposes." The legislative history demonstrates that Congress enacted this provision in order to resolve the very dispute presented here. Specifically noting that the Courts of Appeals had come to conflicting conclusions on the matter and that this Court had granted the petition for certiorari in this case, the Conference Report leaves no doubt that Congress intended to endorse the competing construction. H. R. Conf. Rep. No. 98-861, pp. 1394-1395 (1984). The Senate echoed the House explanation:
Thus, the 98th Congress reiterated its immediate predecessor's intentions not just by words but by deed — not only did it express in legislative history the "histori[c] interpret[ation]" of the relevant income, but it found it sufficient in resolving the disagreement to amend only § 402(a)(8). This 1984 legislation, which, it was said, sought to "[c]larif[y] current law," Senate Print, at 79, leaves no doubt as to the prospective interpretation of the statute,
In sum, while it appears that from the early days of the AFDC program the States regularly have excluded mandatory tax withholdings when determining need, it is clear to us that from some time after the addition in 1962 of the work-expense disregard of § 402(a)(7), and certainly by the time of OBRA, they did so pursuant to the directive of that section to disregard expenses "reasonably attributable" to the earning of income. All the available evidence indicates that the Congress that enacted the OBRA changes in the AFDC program also viewed tax liabilities as work expenses subject to the § 402(a)(7) disregard. That congressional understanding compels the conclusion that mandatory tax withholdings were among the items encompassed by the flatsum disregard of § 402(a)(8).
The judgment of the Court of Appeals is reversed.
It is so ordered.
The State of California, a respondent here under this Courts' Rule 19.6. has filed, with others, a brief in support of the petitioner.
"A state plan for aid and services to needy families with children must
"(7) except as may be otherwise provided in clause (8), provide that the State agency shall, in determining need, take into consideration any other income and resources of any child or relative claiming aid to families with dependent children, . . . as well as any expenses reasonably attributable to the earning of any such income; (8) provide that, in making the determination under clause (7), the State agency —
"(A) shall with respect to any month disregard —
"(ii) in the case of earned income of a dependent child [or] a relative receiving such aid . . . , the first $30 of the total of such earned income for such month plus one-third of the remainder of such income for such month . . . ."
"A state plan for aid and services to needy families with children must . . .
"(7) except as may be otherwise provided in paragraph (8) . . . , provide that the State agency —
"(A) shall, in determining need, take into consideration any other income and resources of any child or relative claiming aid to families with dependent children . . .
"(8)(A) provide that, with respect to any month, in making the determination under paragraph (7), the State agency —
"(ii) shall disregard from the earned income of any child or relative applying for or receiving aid to families with dependent children, or of any other individual (living in the same home as such relative and child) whose needs are taken into account in making such determination, the first $75 of the total of such earned income for such month (or such lesser amount as the Secretary may prescribe in the case of an individual not engaged in full-time employment or not employed throughout the month);
"(iii) shall disregard from the earned income of any child, relative, or other individual specified in clause (ii), an amount equal to expenditures for care in such month for a dependent child . . . receiving aid to families with dependent children and requiring such care for such month, to the extent that such amount (for each such dependent child . . .) does not exceed $160 (or such lesser amount as the Secretary may prescribe in the case of an individual not engaged in full-time employment or not employed throughout the month);
"(iv) shall disregard from the earned income of any child or relative receiving aid to families with dependent children . . . an amount equal to the first $30 of the total of such earned income not disregarded under any other clause of this subparagraph plus one-third of the remainder thereof . . . ; and
"(B) provide that (with respect to any month) the State agency —
"(ii) . . .
"(II) in the case of the earned income of a person with respect to whom subparagraph (A)(iv) has been applied for four consecutive months, shall not apply the provisions of subparagraph (A)(iv) for so long as he continues to receive aid under the plan and shall not apply such provisions to any month thereafter until the expiration of an additional period of twelve consecutive months during which he is not a recipient of such aid."