Rangel Makes Improvements To Work Opportunity Tax Credit

WASHINGTON, D.C. – Today Congressman Charles Rangel [D-NY] and Congressman Aaron Schock [R-IL] introduced the Work Opportunity Tax Credit Improvements Act of 2011 (WOTC). The legislation, aside from renewing the WOTC Act of 1996, would assist in helping discharged veterans and high-risk youth gain employment. Congressman Rangel first sponsored the WOTC in 1977 as the Targeted Jobs Tax Credit.

“In a time of rising economic distress, our disadvantaged youth and discharged veterans have difficulty finding employment,” Rangel said. “The Work Opportunity Tax Credit has helped nearly six million people, including over 200,000 New Yorkers gain employment. By renewing and simplifying the program we’re sending a message to our youth and our heroic veterans that they are not on their own.”

Under the WOTC Improvements Act, tax credits to spur employment for high-risk youth and discharged veterans would be reintroduced after those provisions were not renewed at the end of 2010. Also several hiring tax incentives — which include an Indian hiring credit, DC hiring incentive, and two credits for Empowerment Zone residents — would be consolidated and placed under the core WOTC program.

Since 1996, more than 5,800,000 people have left public assistance programs and have gained employment through the Work Opportunity Tax Credit. Out of the 575,000 people hired in 2010, 145,000 people were certified in the Disconnected Youth category. The Disconnected Youth/High Risk Youth face unemployment rates in excess of 25 percent. Unemployment among returning veterans younger than 24 years of age was 14.1 percent in 2008, outpacing the general population’s rate of 11.6 percent for the same age group.

“America’s veterans and young people are important resources that we have,” Rangel stated. “Re-authorizing the Work Opportunity Credit and investing in our returning soldiers and high-risk youth and will strengthen our great nation as they work hard and stay in the labor force, return to school, and live productive lives. They’ll contribute to our communities, our country, and help America win the future.”

WORK OPPORTUNTIY TAX CREDIT (WOTC) NEEDS TO BE RENEWED AND SIMPLIFIED BY 12/31/11

The Work Opportunity Tax Credit (WOTC) expires on December 31, 2011. This program has helped over 5,800,000 individuals coming off of public assistance programs to secure jobs, become productive members of society, and has provided economic stability for millions of families.

Targeted hiring tax incentives have been part of the tax code since the early 1970s. Congress has always recognized that certain categories of individuals have significant barriers to entering the job market since employers are reluctant to hire them because the costs of putting the structurally unemployed on their payroll and training often exceed their return on investment in such workers.

WOTC is a key element of welfare reform because it provides a bridge from welfare dependence to work. The program encourages employers to hire public assistance recipients and other needy individuals with few job skills and little or no work experience. Having a job is an essential component to keeping families together.

Employers in the retail, health care, hotel, financial services, and food industries have incorporated these programs into their hiring practices.

In 2001, the GAO issued a report indicating that employers have significantly changed their hiring practices as a result of WOTC which was enacted in 1996. Specifically, GAO indicated employers have provided job mentors, lengthened training periods, engaged in recruiting, outreach, and listed jobs or requested referrals from public agencies or partnerships. WOTC has become a true public-private partnership between private sector employers and federal and state agencies.

WOTC provides a 40% credit on the first $6,000 of wages for those working at least 400 hours, or a partial credit of 25% for those working 120-399 hours.

WOTC is both a hiring incentive, helping to offset the higher costs of recruiting, hiring, and retaining public assistance recipients and other low-skilled individuals, and a retention incentive, providing a higher reward for those who stay longer on the job. Because this program has a positive impact and is considered good economic and social policy both Republicans and Democratic Presidents have called for extensions of the program in their Budget submissions to Congress.

SIMPLIFICATION, MODERNIZATION AND MAKING HIRING TAX INCENTIVES MORE EMPLOYER FRIENDLY

EXTENSION AND REAUTHORIZATION:

Tax Code Simplification:

1. Make all hiring tax incentives categories under core WOTC program: Empowerment Zones/Renewal Communities, DC Hiring Tax Incentive, Indian Employment Tax Credit

2. Alternative Certification

3. Reauthorize Disconnected Youth (High Risk Youth) and Unemployed Veterans Categories

MAKING HIRING TAX INCENTIVES SIMPLE AND MORE EMPLOYER ACCESSIBLE

  • Currently, there are several hiring tax incentives which include an Indian hiring credit, DC hiring incentive, and two credits for Empowerment Zone residents. These should all be consolidated and placed under the core WOTC program.
  • Many states are from six months to upwards to two years behind in the processing of employer WOTC “requests for certification” – the State Workforce Agency (SWA) certifies applicant eligibility.
  • Reauthorization of the Disconnected Youth (now High Risk Youth) and Unemployed Veteran Categories

To read the full story please click here: http://rangel.house.gov

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