Work Opportunity Tax Credit

he Work Opportunity Tax Credit (WOTC) explicitly acknowledges that the gap between skill levels and wages for many entry-level applicants can only be bridged by society.

WOTC is based on the targeted jobs tax credit (TJTC) program. Research from the University of Pittsburgh found that the TJTC successfully increased the earnings of employees qualifying for the credit. The TJTC was modified into the WOTC during the monumental 1996 welfare reform legislation. WOTC is a critical component of facilitating the transition of an exceptionally low-skill population—estimating that upwards of 30% of welfare recipients are illiterate. Employers can claim WOTC credits for applicants when applicants are:

Current or former participants in TANF
Veterans who currently or formerly participated in food stamps
Food stamps recipients aged 18-24 years-in families currently or formerly in the food stamp program
Youths aged 18-24 living in empowerment zones or enterprise communities
Youths ages 16-17 living in empowerment zones for summer months only
Ex-felons in low-income communities
Individuals currently or formerly receiving Supplemental Security Income
Individuals currently or formerly receiving vocational rehabilitation services

By facilitating the actual employment of low-skill employees, WOTC is superior to non-workforce based job training programs—such as Workforce Investment Act (WIA) one stop training centers. While tax credits granted to individual employees through the Earned Income Tax Credit (EITC) enjoy relatively high participation rates, few businesses actually utilize the WOTC program. Improved knowledge of this program in the business community could dramatically improve the employment opportunities and earnings for low-skill Americans.