[Congressional Record Volume 143, Number 70 (Friday, May 23, 1997)]
[Extensions of Remarks]
[Page E1058]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


          WORK OPPORTUNITY TAX CREDIT RENEWAL AND MODIFICATION

                                 ______
                                 

                           HON. AMO HOUGHTON

                              of new york

                    in the house of representatives

                         Thursday, May 22, 1997

  Mr. HOUGHTON. Mr. Speaker, today I am joined by my colleague, Mr. 
Rangel, in introducing legislation to renew the Work Opportunity Tax 
Credit [WOTC]. This program was first enacted last year after extensive 
consultations between the Congress and administration. It replaces the 
old targeted jobs tax credit and is designed to address the major 
criticism raised against that program by requiring employers to 
prescreen for eligibility based predominantly upon participation in 
means tested public assistance programs. The WOTC helps provide 
transitional assistance for those going from welfare to work by giving 
businesses incentives to offset the added costs of hiring them.
  Unfortunately, the participation and outreach by employers has not 
reached the level we anticipated, and falls far short of what is needed 
if we are to achieve the goal of moving millions of Americans from 
welfare dependency to self-sufficiency. Many companies are fast 
concluding that the hiring and training costs are too high, and the 
risks of working with those on public assistance too great, to justify 
their participation in WOTC.
  After nearly 6 months the business community has told us that there 
is good news and bad news. The good news is that under WOTC nearly two-
thirds of those hired come from welfare--under TJTC nearly 60 percent 
were youth and only 20 percent were from the welfare rolls. The bad 
news is that the new rules we adopted last year are too restrictive and 
need to be modified if WOTC is to be effective in achieving the goals 
of welfare to work. The legislation we are introducing today addresses 
these concerns.
  Many people want to know why we need to pay companies to do their 
part for welfare reform. To answer that question, we have only to look 
at the challenges faced by employers who hire public assistance 
recipients. These individuals often lack a work ethic and basic job 
skills; they cost more to train; and, because of low self-esteem, they 
see failure in the work place as a viable and even likely option. 
Additionally, businesses that hire public assistance recipients have to 
assume indirect costs such as accommodation of complex work schedules, 
child care, transportation needs, and contact with multiple social 
service agencies. Any business, especially one that is willing to 
assume the additional costs of hiring and training welfare recipients, 
must remain profitable if they are to play a role in welfare reform.
  To respond to the real world concerns expressed to us, Mr. Rangel and 
I propose the following modifications to WOTC which will improve its 
effectiveness and viability.
  First, our bill would modify the minimum number of hours of work 
required for WOTC eligibility. Currently, those eligible for WOTC must 
complete 400 hours of work in order for the employer to receive any tax 
credit. However, since many entry level workers tend to switch jobs 
voluntarily as they seek their place in the work force, they do not 
meet the 400-hour requirement. In those cases, employers never see a 
tax credit to offset the costs that they incurred in hiring and 
training these workers. A more equitable sharing of the costs must be 
developed, or the pool of employers willing to take this risk will 
continue to decline.
  The current tax credit provided to employers for hiring those 
eligible is 35 percent of the first $6,000 in wages, but only when the 
employee completes 400 hours of work. Those who qualify include persons 
on AFDC for 9 consecutive months out of the previous 18 months; 18- to 
24-year-olds who live in empowerment zones [EZ] or enterprise community 
[EC]; 18- to 24-year-olds who are members of families on food stamps 
for the last 6 months; veterans on food stamps; vocational 
rehabilitation referrals; low-income felons; and 16- and 17-year-olds 
in EZ's and EC's are eligible for summer employment.
  We propose to create a two-tiered credit: 25 percent of the wages 
earned from the date of hire for those who work between 120 hours and 
399 hours, and 40 percent of wages earned from the date of hire for 
those who work at least 400 hours. This would result in a more 
equitable distribution of the risk due to the fact quite often entry 
level employees use the training and experience by their first employer 
to advance into jobs that are better paying, provide longer hours, or 
which are more conveniently located.
  The second change to WOTC that this legislation provides would be to 
redefine the period during which a person must be receiving public 
assistance in order to qualify. The current interpretation requires an 
employee to have spent 9 consecutive months out of the last 18 months 
on welfare in order for a business to receive the hiring tax credit. We 
propose to change that requirement to any 9 of the previous 18 months. 
Such a change would allow for the short periods of time off welfare or 
food stamps which often results from a failure to comply with 
regulations such as filing updated paperwork or appearing for an 
interview. It makes no sense to deny employers willing to hire those on 
public assistance a tax incentive merely because the job applicant was 
off welfare for a short period of time.
  The third and final change we propose is a 3-year extension of the 
WOTC Program. This will provide employers with the continuity they need 
to justify the investment of time and resources necessary to have a 
successful welfare to work WOTC Program.
  These changes, taken together, should help to level the playing field 
which is currently so tilted against those on welfare that most 
employers are unwilling even to consider hiring them because of the 
extra costs and difficulties involved. Without a strong public-private 
partnership built on an improved WOTC Program, employers will be 
inclined to stand on the sidelines and leave the welfare to work 
challenge to others.

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