By RoxAnn Klugman, J.D., LL.M. (Masters of Tax Laws), Hudson
First, what is Work Opportunity Tax Credit (WOTC)? It is a Federal program initiated in 1996 to give incentives to private employers to hire individuals who consistently face significant barriers to employment. This initiative serves to target specific groups of individuals such as: SNAP (Supplemental Nutrition Assistance Program) recipients; TANF (Temporary Assistance for Needy Families) recipients; SSI (Supplemental Security Income) recipients; long term unemployment recipients; unemployed and disabled veterans; ex-felons; vocational rehabilitation referred individuals; individuals living in empowerment zones.
What is in it for the employer? The employer receives up to $9,600 in tax credits for every person they hire who fits into one of these targeted groups. For example, if the employer owes $20,000 in Federal income tax the $9,600 tax credit reduces the amount owed to $10,400. This is a powerful incentive to hire only those in the targeted groups so the Federal income tax owed can be substantially reduced. This benefits both the employer and the new employee who is in the workforce so it is sound policy for those reasons, but there are unintended consequences created by this Federal program.
What are the unintended consequences? Individuals who want to enter the workforce but don't fit into these target groups have a difficult time finding entry-level employment. I know people who are looking for a job, a friend, our neighbor's son and my daughter. They are all casualties of this Federal program. They have noticed the "Hiring" signs, filled out the applications and then they are told, "You are not the applicant we are looking to hire." The applications they filled out ask questions to determine if the applicant is in any one of the targeted groups for the WOTC. How is the WOTC program impacting our community? This powerful incentive to reduce the employer's Federal income tax is causing local employers to bring in people who fit into the targeted groups instead of hiring my daughter, my neighbor's son and my friend. Our local people are being denied these jobs and people in the targeted groups are being brought into our community to fill these jobs. Importing people who are in these targeted groups to fill these jobs leads to other consequences that taxpayers will be forced to subsidize.
The St Croix County Board is looking into starting a new transportation service, a little peculiar in our rural community. Be forewarned, public transportation is highly subsidized by taxpayers. Following public transportation the next need will be for more low-income housing. There are a multitude of Federal income tax credits for high-income earners who invest in low-income housing.
In summary, we have choices to make. Do we want to encourage the hiring of local people or do we want to encourage hiring individuals in the targeted groups even if we have to import them from the Twin Cities? The later option means that we, the taxpayers, will heavily subsidize these individuals first through the tax credits given out, then by transportation services, followed by low income housing, and medical services. It looks like the "Big Spenders" on the St Croix County Board have chosen the later option for the county and we will be paying for it with higher and higher taxes and lower employment opportunities for locals.