On March 16, the Senate Finance Committee held a hearing to examine a number of tax provisions scheduled to expire at the end of the year, including the Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work Tax Credit (W-t-W). The WOTC allows employers to take a tax credit of up to $2,400 for hiring individuals from certain targeted groups, including families who receive benefits under the Temporary Assistance for Needy Families (TANF) program, high-risk youth, qualified ex-felons, and individuals on food stamps. The W-t-W allows employers of qualified long-term family assistance recipients under TANF to take a tax credit of up to $8,500 over a two-year period. Noting that the hearing would focus “largely on business-related provisions that expire annually,” Chair Chuck Grassley (R-IA) said that “During the 108th Congress, the Senate was able to consider and pass much-needed modifications to ‘extender’ proposals like the research and development tax credit and the work opportunity tax credit. Unfortunately, those improved provisions did not make it out of conference because the House believed they lacked a basis for change.”
Pointing to legislation (S. 595) sponsored by himself and Sen. Rick Santorum (R-PA) to combine, expand, and permanently extend the WOTC and the W-t-W, Ranking Member Max Baucus (D-MT) said that these credits create “a win-win situation both for employers and low-income individuals who are looking for a job.” He added, “Since 1996, these credits have helped more than 2 million individuals on public assistance enter the workforce, giving them hope and a future.”
Two witnesses testified in support of permanently extending the WOTC and the W-t-W tax credits. Dale Giovengo, director of human resources at Giant Eagle Markets in Pittsburgh, Pennsylvania, told the committee that the credits support any additional training and acclimation costs associated with new hires made by his company. “The individuals we hire with special employment needs often lack the basic work skills that our traditional new hires have and we must provide training. Our experience has shown us that our spending on special training for this population is a good investment. We have found that many of our WOTC/W-t-W hires become loyal, well-trained employees with a turnover rate comparable to or better than our overall workforce.”
Mr. Giovengo expressed his support for S. 595 saying that 1) making the credits permanent will send “a strong signal” of Congress’ commitment to the programs; 2) combining the two credits will “simplify the program administration;” and 3) expanding the “age eligibility for high-risk youth and food stamp groups will help companies like ours move more unemployed men, who are often fathers of children on welfare, into the workforce. To date, the program has been very helpful in encouraging us to hire women on welfare, but as currently structured, we receive no incentive to hire absentee fathers who also face significant if not greater barriers to work as welfare moms.”
Testifying on behalf of the New York State (NYS) Department of Labor, Director of Economic Development Services Hy L. Dubowsky detailed New York’s workforce development successes. According to a 2003 report, the “NYS Department of Labor concluded that WOTC benefits surpassed costs by more than $200 million. Public spending was reduced, as hard-to-employ individuals transitioned into private-sector jobs, earned wages and lessened their reliance on government supported programs.” However, he added that the state’s ability to provide services was weakened when the WOTC and W-t-W programs expired on December 31, 2003 and were not reauthorized until October 2004: “In New York, as in other states, the uncertainty surrounding program reauthorization virtually brought our efforts to a halt. During the nine-month hiatus, New York’s certification activity dropped by 54 percent from the prior year…The lack of certainty that the credits will be extended beyond the December 31, 2005 expiration date may have negative consequences.”
