Senator Tammy Baldwin Introduces the Jobs for Economic Recovery Act, includes an Employee Retention Tax Credit based on the Work Opportunity Tax Credit (WOTC)

U.S. Senator Tammy Baldwin (D-WI) last week introduced legislation (PDF) to support the economic recovery by immediately financing six months of wages and benefits for unemployed workers. Baldwin is leading this effort with Senate Finance Committee Ranking Member Ron Wyden (D-OR) and Senators Chris Van Hollen (D-MD), Michael F. Bennet (D-CO) and Cory A. Booker (D-NJ).

“Millions of Americans are unemployed and struggling to make ends meet, so we need a bold, federal investment in state and local transitional jobs programs to create job opportunities and put people back to work,” said Senator Baldwin. “As we support workers and businesses in our recovery from this economic crisis, this legislation is a stronger way forward and we should seize it.”

The Jobs for Economic Recovery Act would provide immediate funding for states, tribes, and local governments to create or expand employment programs through a new Social Security Act jobs program, which would finance six months of wages and benefits for public, private, or nonprofit jobs. Funds could also be used for job training and services like child care to help workers succeed upon completion of their job placement.

Providing immediate funding for subsidized employment programs would allow states to target individuals who have become unemployed or underemployed as a result of COVID-19, and create essential jobs to respond to the public health emergency. To protect public health, these funds could not be used to fund a position that puts workers’ health at risk. The bill also authorizes grants to nonprofit organizations to support similar programs and provides funding for technical assistance and planning.

By 2022, the bill would require programs to meet new criteria and rely on evidence-based practices to continue receiving funding. Phasing-in these requirements would ensure that states, tribes, and localities have the flexibility to quickly respond to this crisis, while ensuring strong, evidence-based programs over the long-term.

By guaranteeing funding for employment programs remains available into the future, the Jobs for Economic Recovery Act will prevent these programs from disappearing like they did after the Great Recession, and allow them to provide critical employment support as the job market improves.

Lastly, the bill creates an Employee Retention Tax Credit based on the Work Opportunity Tax Credit (WOTC) for employers who retain workers hired through the program for 24 months.

  • Creates a new Employee Retention Credit (§ 51(l) of the Internal Revenue Code) for employers that retain workers hired through the program on or before December 31, 2021.
  • Sets the credit value equal to 40% of the eligible individual’s second year of wages up to a cap of $6,000.
  • Requires a GAO study to evaluate:
    • Whether the retention credit had a meaningful impact on retention as compared with other currently existing and previous subsidized employment programs; and
    • Whether such retention credit was easily understood by employers and had an impact on hiring decisions.
    • Extends the Work Opportunity Credit with respect to workers hired on or before December 31, 2022.

Professor Mark Paul, Assistant Professor of Economics at the New College of Florida: “The nation is currently experiencing the worst labor market in living memory. Tens of millions of workers are currently sidelined due to no fault of their own. The Jobs for Economic Recovery Act is vital legislation that will help put Americans back to work as quickly as possible once it’s safe, paving the way for a job-led economic recovery.”

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