Tax incentive programmes

1 Activation through wage subsidies and wage supplements 

Human Services. 2006. Annual Update of the HHS Poverty Guidelines, F.R. 71, pp. 3848-3849. 

The WWTC and WOTC are administered through the US Department of Labor with cooperation from the US Treasury, since the subsidy is paid out in the form of a tax credit. State and local agencies must also cooperate, since the programmes are targeted to the economically disadvantaged, the employment of whom is the responsibility of local One-Stop Career Centers established under the Work Investment Act (WIA). 

The Work Opportunity Tax Credit (WOTC), enacted in 1997, is the immediate successor of the long-standing Targeted Jobs Tax Credit, which served disadvantaged 

All private-sector employers who hire a new worker from this eligible group are entitled to tax credits. However, the decision to apply for certification and to file for the tax credit is up to the discretion of the employer. The WOTC can reduce employers federal tax liability by as much as USD 2,400 per new hire (USD 1,200 for each new summer youth hire). 

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Elements of activation can be found in several different programmes of the US employment promotion system. Activating labour market policy27 is primarily realised through four programmes (1) unemployment insurance (UI), (2) welfare, (3) workforce development programmes and (4) federal and state tax incentive programmes.28... 

There are two kinds of federal tax incentive programmes tax incentives for low wage workers to boost or supplement their available income, and tax incentives for employers who hire individuals with certain barriers to employment. The most well-known and largest programme is directed toward workers and called the Earned Income Tax Credit, regulated in 32 of the Internal Revenue Code (IRC) (26 USCA 32.). Nearly USD 31 billion was provided as EITC benefits in FY 2003.37... 

In the mid-seventies an additional work-incentive measure was enacted the Earned Income Tax Credit (EITC).15 EITC became a permanent programme in 1978.16 EITC functions as a wage supplement. It makes low-wage work more attractive to unemployed individuals and benefit recipients, while at the same time benefiting employers by subsidising employment in low-wage jobs. 

Financial work incentives like income disregards or asset disregards and refundable tax credits are activation instruments affecting the decisions of most TANF programme participants in the US. These features are intended to encourage work effort, and employment and to promote self-sufficiency for TANF families. 

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