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The future of WOTC

January 5, 2017

By Stacey May, Director of Tax Credits

After the Work Opportunity Tax Credit’s (WOTC) recent renewal through 2019, businesses and state agencies felt an air of certainty for the first time in a while. With the program renewed for almost four continuous years, plans for hiring practices, tax returns and consistent workloads seemed assured. However, with the election of Donald Trump and Republican majorities in Congress pushing for tax reform in 2017, WOTC’s future is up in the air again.

The Ways and Means Committee, with Rep. Kevin Brady at the helm, plans to deal with tax credits and extenders such as WOTC in the process of crafting reform. Although Chairman Brady suggested he wants to get rid of many tax extenders, the good news is that WOTC is positioned better than most credits for a shot at permanent inclusion in the tax code.

Not only does WOTC save businesses on their bottom line, but it has proven to be one of the best tools to get historically underemployed Americans off of federal aid programs and into productive private sector jobs. This is a message representatives on both sides of the aisle can understand and get behind. WOTC is not just a tax break; it is a highly effective means of reducing government dependence and spending overall on both the federal and state level.

The numbers speak for themselves. Since 1996, state workforce agencies issued over 12 million WOTC certifications resulting in over $1 billion in tax savings. This means 12 million Americans who were historically underemployed found jobs, and the vast majority no longer require government assistance.

Dr. Peter Cappelli, of The Wharton School at the University of Pennsylvania, estimates there is at least a 15:1 benefit in terms of savings for the federal government for each Temporary Assistance for Needy Families (TANF) recipient (one of WOTC’s largest target groups) hired because of WOTC. The benefits for veteran and long-term unemployed target groups are even higher at up to almost a 30:1.

Solidifying WOTC as permanent part of the tax code will require congressional approval. In an effort to gain universal support, advocates continue to push that WOTC is not just another tax break, it helps Americans get and keep jobs, and it greatly reduces government spending. As a flexible policy tool with an extremely low fraud rate, it is likely to remain on Congress’s agenda for years to come.

Check out our YouTube video on HKP’s tax credit services: https://www.youtube.com/watch?v=tTU6P6rnkEI

For more information or assistance on WOTC and employment tax credits, call 888-556-0123, email taxcreditrep@hkpayroll.com or submit our online form.

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