At the end of 2025, Congress let the Work Opportunity Tax Credit (WOTC) lapse, and rightly so. I argued on three separate occasions that letting WOTC expire was the right thing to do.
The credit does not affect hiring decisions, and its benefits overwhelmingly accrue to a handful of large corporations, not employees. Over the past 3 decades, the program has been renewed 13 times, and 7 of those renewals occurred after a temporary legislative hiatus.
As policymakers return to Congress after the midterm elections, they will have just 24 legislative days during the year-end lame-duck session, and they are likely to push once again for WOTC to be renewed a 14th time.
As if renewing an expensive and ineffective corporate giveaway wasn’t bad enough, the renewed version of WOTC that is likely to be included in a tax extenders bill is an expansion of the existing program.
We know this because legislative efforts to renew WOTC last year included raising the credit to 50% of the first $6,000 in wages, plus 50% of wages from $6,000 to $12,000 for workers who reach 400 hours. That takes the standard maximum tax credit from $2,400 to $6,000.
The same proposal aims to index the wage caps to inflation and drop the under-40 age limit for SNAP recipients, while adding military spouses as a new target group and extending the credit through 2030.
While last year I noted that the existing WOTC costs about $25 billion over 10 years, a study conducted by Ernst & Young (EY) found that the combined cost of extension and expansion would be about $40 billion over the 2025-2034 period. However, this estimate does not account for the inflation indexing or the addition of military spouses in the latest proposal.
Notably also, their dynamic score assumes that spending through the tax code will be partly offset by cuts in government spending. In reality, the lame-duck package won’t cut spending, but will instead worsen the deficit even further.
A back-of-the-envelope estimate that indexes the EY figure for inflation and adds in military spouses as a new target group yields a 10-year cost figure of about $48.8 billion. Adding nearly $50 billion to the 10-year deficit is a bad idea given our dire fiscal trajectory.
If policymakers do renew and expand WOTC, the credits will be rewarded in 2027 for business hires made in 2026. This is a key problem with WOTC—it awards employers for decisions they made without even knowing whether a credit would exist. This shows that the credit works as a filing routine, and not as a serious factor in hiring decisions.
But we’ve known this for decades. As one WOTC recipient firm stated in a telephone survey: “The information is sent to our corporate office, a third party processes the forms, and the tax credits come back to us like a bonus.” In effect, the firms get “bonuses” for simply putting a form in their hiring packets and sending them off to be processed.
Even before the creation of the WOTC in 1996, there was a predecessor program with many of the same goals, the Targeted Jobs Tax Credit (TJTC). An audit report published by the Department of Labor in 1994 found that “92 percent of those individuals for whom employers could have claimed a credit would have been hired regardless of the tax subsidy.” The audit report concluded that “the program largely subsidizes the wages of those who are hired irrespective of their eligibility and the availability of a tax credit.”
This isn’t a unique finding for WOTC but tends to be a common feature among hiring tax credits broadly speaking. Economist Timothy Bartik reviewed the effect of Michigan’s MEGA tax credit program aimed at hiring or retaining workers, especially in the manufacturing sector. He found the tax credit incentive decisive in only 8% of cases, meaning 92% of credits subsidized jobs that would have existed regardless of whether the credit was offered.
A more recent meticulous analysis of 13 million workers over two decades suggests that the windfall rate is around 97%, and the authors could not rule out the statistical possibility that 100% of the hires would have occurred in the absence of the credit.
Even the aforementioned EY study, which was prepared for a staffing firm, Allegis Group, assumes that only about 13% of WOTC costs support jobs that wouldn’t otherwise exist. In other words, WOTC rewards $7.30 in credits for every $1 that actually changes a hiring decision.
This is particularly telling because most WOTC certifications are captured by temporary staffing agencies, and even studies produced for such staffing firms admit that they capture roughly 87% of the value of these credits as a windfall.
It should come as no surprise then that the biggest lobbyists for reviving and expanding WOTC are the same large staffing agencies that benefit from these billions in dollars of taxpayer funds.
Ultimately, the best thing Congress can do is let WOTC expire. If policymakers want to genuinely help disadvantaged workers, and not just subsidize large firms, more effective reforms are readily available:
Lower regulatory barriers such as occupational licensing rules that keep would-be workers sidelined.
Modernize work requirements and remove structural barriers to employment.
Expand opportunities for independent contracting and flexible work arrangements.
These reforms actually improve incentives to work and grow the labor market. They do not require building subsidy-harvesting bureaucracies inside HR departments.
With the nation’s debt at historic highs, extending and expanding an ineffective, costly and regressive corporate subsidy is the opposite of responsible governance. Allowing the WOTC to expire would demonstrate that Congress can still distinguish between genuinely pro-worker policies and corporate tax preferences.
The business lobby wants lawmakers to believe that failing to revive WOTC would harm workers. The data show the opposite: The credit barely affects hiring decisions, and its benefits accrue overwhelmingly to employers, not employees.
Congress should resist the lobbying pressure, follow the evidence, and let the WOTC expire as intended. It is time to end this corporate handout and start building a tax code that truly reflects the nation’s priorities.