[Congressional Record Volume 151, Number 28 (Thursday, March 10, 2005)]
[Senate]
[Pages S2488-S2490]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SANTORUM (for himself, Mr. Baucus, Mr. Smith, Mr. 
        Rockefeller, and Mr. Jeffords):
  S. 595. A bill to amend the Internal Revenue Code of 1986 to modify 
the work opportunity credit and the welfare-to-work credit; to the 
Committee on Finance.
  Mr. SANTORUM. Mr. President, I am pleased to join Senator Baucus in 
the reintroduction of the Encouraging Work Act of 2005. The Work 
Opportunity Tax Credit (WOTC) and We1fare-to-Work Tax Credit (W-t-W) 
are tax incentives that encourage employers to hire public assistance 
recipients and other individuals with barriers to employment. The 
combination of Welfare Reform passed by Congress in 1996 and the 
assistance to employers found in the WOTC and W-t-W has enabled 
expanded opportunity for many Americans. Yet more can be done. We were 
pleased that the Senate JOBS bill passed last year included a permanent 
WOTC/W-t-W provision along with helpful reforms largely supported by 
the Administration. Unfortunately, it was only extended in another tax 
relief bill. Without action by Congress WOTC and W-t-W will expire on 
January 1, 2006.
  Under present law, WOTC provides a 40 percent tax credit on the first 
$6,000 of wages for those working at least 400 hours, or a partial 
credit of 25 percent for those working 120-399 hours. W-t-W provides a 
35 percent tax credit on the first $10,000 of wages for those working 
400 hours in the first year. In the second year, the W-t-W credit is 50 
percent of the first $10,000 of wages earned. WOTC and W-t-W are key 
elements of welfare reform. A growing number of employers use these 
programs in the retail, health care, hotel, financial services, food, 
and other industries. These programs have helped over 2,700,000 
previously dependent persons to find jobs.
  WOTC and W-t-W eligibility is limited to: 1. Recipients of Temporary 
Assistance to Needy Families (TANF) in 9 of the 18 months ending on the 
hiring date; 2. individua1s receiving Supplemental Security Income 
(SSI) benefits; 3. disabled individuals with vocational rehabilitation 
referrals; 4. veterans on food stamps; 5. individuals in households 
receiving food stamp benefits; 6. qualified summer youth employees; 7. 
low-income ex-felons; and 8. individua1s age 18-24 1iving in 
empowerment zones or renewal communities. Eligibility for W-t-W is 
limited to individuals receiving welfare benefits for 18 consecutive 
months ending on the hiring date. More than 80 percent of WOTC and W-t-
W hires were previously dependent on public assistance programs. These 
credits are both a hiring incentive--offsetting some of the higher 
costs of recruiting, hiring, and retaining public assistance recipients 
and other low-skilled individua1s--and a retention incentive, providing 
a higher reward for those who stay longer on the job.
  After eight years of experience with these programs, their value has 
been well demonstrated. In 2001, the GAO issued a report that indicated 
that employers have significantly changed their hiring practices 
because of WOTC. With the resources provided by WOTC, employers have 
provided job mentors, lengthened training periods, engaged in 
recruiting outreach, and listed jobs or requested referrals from public 
agencies or partnerships. WOTC and W-t-W have become a true public-
private partnership in which the Department of Labor, the Internal 
Revenue Service, the states, and employers have forged excellent 
working relationships.

  But the challenges for employers and those looking for better 
opportunities are real. The job skills of eligible persons leaving 
welfare are sometimes limited, and the costs of recruiting, training, 
and supervising low-skilled individuals cause many employers to look 
elsewhere for employees. WOTC and W-t-W are proven incentives for 
encouraging employers to seek employees from the targeted groups. 
Despite the considerable success of WOTC and W-t-W, many vulnerable 
individuals still need a boost in finding employment. There are several 
legislative changes that would strengthen these programs, expand 
employment opportunities for needy individuals, and make the programs 
more attractive to employers.
  Combine WOTC and W-t-W. The Administration's FY 2006 budget proposes 
to simplify these important employment incentives by combining them 
into one credit and making the rules for computing the combined credits 
simpler. The credits would be combined by creating a new welfare-to-
work target group under WOTC. The minimum employment periods and credit 
rates for the first year of employment under the present work 
opportunity tax credit would apply to W-t-W employees. The maximum 
amount of eligible wages would continue to be $10,000 for W-t-W 
employees and $6,000 for other target groups ($3,000 for summer youth). 
In addition, the second year 50-percent credit under W-t-W would 
continue to be available for W-t-W employees under the modified WOTC.
  Eliminate Requirement to Determine Family Income for Ex-Felons. Under 
current law, only those ex-felons whose annual family income is 70 
percent or less than the Bureau of Labor Statistics lower living 
standard during the six months preceding the hiring date are eligible 
for WOTC. The Administration's FY 2006 budget proposes to eliminate the 
family income attribution rule.
  Permanent Extension of WOTC and W-t-W. Permanent extension would 
provide these programs with greater stability, thereby encouraging more 
employers to participate, make investments in expanding outreach to 
identify potential workers from the targeted groups, and avoid the 
wasteful disruption of termination and renewal. A permanent extension 
would also encourage the state job services to invest the resources 
needed to make the certification process more efficient and employer-
friendly.
  Raise the WOTC age eligibility ceiling from 24 to 39 years of age for 
members of food stamp households and ``high-risk youth'' living in 
enterprise zones or renewal communities. Current WOTC eligibility rules 
heavily favor the hiring of women because single mothers are much more 
likely to be on welfare or food stamps. Women constitute about 80 
percent of those hired under the WOTC program, but men from welfare 
households face the same or even greater barriers to finding work. 
Increasing the age ceiling in the ``food stamp category'' would greatly 
improve the job prospects for many absentee fathers and other ``at 
risk''

[[Page S2489]]

males. This change would be completely consistent with program 
objectives because many food stamp households include adults who are 
not working, and more than 90 percent of those on food stamps live 
below the poverty line.
  WOTC and W-t-W are also key elements of welfare reform. Employers in 
the retail, health care, hotel, financial services, and food industries 
have incorporated this program into their hiring practices and through 
these programs, more than 2,700,000 previously dependent persons have 
found work. A recent report issued by the New York State Department of 
Labor bears this out in economic terms. Comparing the cost of WOTC 
credits, taken by New York state employers during the period 1996-2003 
(for a total of $192.59 million), with savings achieved through closed 
welfare cases and reductions in vocational rehabilitation programs and 
jail spending (for a total of $199.89 million), the State of New York 
concluded that WOTC provided net benefits to the taxpayers even without 
taking into account the additional economic benefits resulting from the 
addition of new wages.
  In that regard, the New York State analysis concluded that the 
roughly $90 million in wages paid to WOTC workers since 1996 generated 
roughly $225 million in increased economic activity. Perhaps even more 
importantly, the study found that roughly fifty-eight percent of the 
TANF recipients who entered private sector employment with the 
assistance of WOTC stayed off welfare. I mention the New York State 
study because it is the first of its kind; however, I am certain that 
similar conclusions would be reached in the Commonwealth of 
Pennsylvania or any of the other forty-eight states and the District of 
Columbia. These programs work and do so at a net savings to taxpayers. 
In fact, over a 7-year period there were more than 110,000 
certifications for both WOTC and W-t-W in Pennsylvania, alone enabling 
many to leave welfare and find private sector work. The legislation is 
supported by hundreds of employers throughout Pennsylvania and around 
the country. WOTC and W-t-W have received high praise as well from the 
federal government. A 2001 GAO study concluded that employers have 
significantly changed their hiring practices because of WOTC by 
providing job mentors, longer training periods, and significant 
recruiting outreach efforts.
  WOTC and W-t-W are not traditional government jobs programs. Instead 
they are precisely the type of program that we should champion in a 
time when we need to be fiscally responsible. These are efficient and 
low cost public-private partnerships that have as their goal to provide 
a means by which individuals can transition from welfare to a lifetime 
of work and dignity.
  The Work Opportunity Credit and Welfare-to-Work Credit have been 
successful in moving traditionally hard-to-employ persons off welfare 
and into the workforce, where they contribute to our economy. However, 
employer participation in these important programs can be increased, 
particularly among small and medium-sized employers. This is due to the 
complexity of the credits and the fact that they are both only 
temporary provisions of the tax code subject to renewal every year or 
two. Small, medium, and even some large employers find it difficult to 
justify developing the necessary infrastructure to administer and 
participate in these programs when their continued existence beyond one 
or two years is constantly in question.
  This legislation will remedy this problem by combining WOTC and W-t-W 
into one, more easily administered tax credit, and by making it a 
permanent part of the tax code. Many organizations including the 
National Council of Chain Restaurants, National Retail Federation, Food 
Marketing Institute, National Association of Convenience Stores, 
National Restaurant Association, American Hotel & Lodging Association, 
National Roofing Contractors Association, National Association of Chain 
Drug Stores, American Nursery and Landscape Association, and the 
American Health Care Association support this legislaiton. 
Representatives Jerry Weller R-IL, Charles Rangel D-NY, and Phil 
English R-PA are introducing identical legislation in the House of 
Representatives. I urge my colleagues to join us in supporting this 
legislation.

  Mr. BAUCUS. Mr. President, I am pleased to join my colleague, Senator 
Santorum, in introducing legislation to permanently extend and improve 
upon the Work Opportunity and the Welfare-to-Work tax credits. Last 
year, I was pleased to successfully add a permanent a extension of 
these credits to the Senate passed JOBS bill, which combined the 
credits and made certain improvements. When the expiring tax provisions 
were considered last year as part of the Working Families Tax Relief 
bill, I offered an amendment to combine both credits and make them 
permanent. While this provision was not retained in conference, I was 
successful in securing an extension of the current program through 
December 31, 2005. This extension expires at the end of this year so 
immediate action is needed to make these credits permanent and make 
several reforms in the programs to improve their effectiveness. These 
recurring lapses and extensions make administration of this credit 
burdensome both for the taxpaying employer, who cannot keep track of 
who is or isn't qualified, and for the IRS, which needs to ensure 
taxpayers are complying with the ever-shifting law.
  Over the past decade, the Work Opportunity Tax Credit, WOTC, and the 
Welfare-to Work, W-t-W, have helped over 2.2 million public assistance 
dependent individuals enter the workforce. Both of these important 
programs are scheduled to expire on December 31, 2005. These hiring tax 
incentives have clearly demonstrated their effectiveness in helping to 
level the job selection playing field for low-skilled individuals by 
providing employers with additional resources to help recruit, select, 
train and retain individuals with significant barriers to work. Many 
vulnerable individuals still need a boost in finding employment, and 
this is particularly critical during periods of high unemployment. The 
weak economy and rising unemployment give employers many more hiring 
options because of the larger pool of experienced laid-off workers. 
Without an extension of these programs, the task of transitioning from 
welfare-to-work will become even harder for individuals who reach their 
welfare eligibility ceiling.
  Because of the costs involved in setting up and administering a WOTC/
W-t-W program, employers have established massive outreach programs to 
maximize the number of eligible persons in their hiring pool. The 
States, in turn, have steadily improved the programs through improved 
administration. WOTC has become an example of a true public-private 
partnership design to assist the most needy applicants. Without the 
additional resources provided by these hiring tax incentives, few 
employers would actively seek out this hard-to-employ population.
  WOTC provides employers with a graduated tax credit equal to 25-
percent of the first $6,000 in wages for eligible individuals working 
between 120 hours and 399 hours and a 40-percent tax credit on the 
first $6,000 in wages for those working over 400 hours. The W-t-W tax 
credit is geared toward long-term welfare recipients and provides a 35-
percent tax credit on the first $10,000 in wages during the first year 
of employment and a 50-percent credit on the first $10,000 for those 
who stay on the job a second year.
  In my own State of Montana, many businesses take advantage of this 
program, including large multinational firms and smaller family-owned 
businesses. Those who truly benefit from the WOTC/W-t-W program, 
however, are low-income families, under the Food Stamp Program, the Aid 
to Families with Dependent Children, AFDC, and Temporary Assistance for 
Needy Families, TANF, programs, and also low-income U.S. Veterans. In 
Montana, more than 1,000 people were certified as eligible under the 
WOTC program during an 18-month period, October 2001 through March 
2003, including 476 Food Stamp recipients, 475 AFDC/TANF recipients, 
and 52 U.S. veterans.
  The bill we are introducing provides for a permanent program 
extension of the two credits. After a decade of experience with WOTC 
and W-t-W, we know that employers do respond to these important hiring 
tax incentives. Permanent extension would provide these

[[Page S2490]]

programs with greater stability, thereby encouraging more employers to 
participate, make investments in expanding outreach to identify 
potential workers from the targeted groups, and avoid the wasteful 
disruption of termination and renewal A permanent extension would also 
encourage the state job services to invest the resources needed to make 
the certification process more efficient and employer-friendly.
  The bill also includes a proposal to simplify the programs by 
combining them into one credit and making the rules for computing the 
combined credits simpler. This would be accomplished by creating a new 
welfare-to-work target group under WOTC. The minimum employment periods 
and credit rates for the first year of employment under present work 
opportunity tax credit would apply to W-t-W employees. The maximum 
amount of eligible wages would continue to be $10,000 for W-t-W 
employees. In addition, the second year 50-percent credit under W-t-W 
would continue to be available for W-t-W employees under the modified 
WOTC.
  Finally, there are other changes in the bill that would extend these 
benefits to more people and help them find work. Because of the 
program's eligibility criteria, over 80 percent of those hired are 
women leaving welfare. Since men are not eligible for TANF benefits 
unless they are parenting their kids, the fathers of children on 
welfare receive little help in finding work, even though they often 
face barriers to work just as women on welfare do. We propose to help 
absentee fathers find work and provide the resources to assume their 
family responsibilities by opening up WOTC eligibility to anyone 39 
years old or younger in families receiving food stamps or residing in 
enterprise zones or empowerment communities. Raising the eligibility 
limits in these two categories will extend eligibility to hundreds of 
thousands of at-risk men.
  I urge my colleagues to support this important piece of legislation.
                                 ______