Work Opportunity Tax Credit Is US Labor Strategy’s Missing Piece

The Department of Labor, Department of Commerce, and Department of Education last month unveiled “America’s Talent Strategy: Equipping American Workers for the Golden Age.” This forward-looking plan provides a strong framework for building pipelines of skilled talent.

It prepares workers for an artificial intelligence-driven economy and helps ensure the US remains the global leader in innovation and economic growth. From expanding apprenticeships to prioritizing AI literacy, the administration’s strategic pillars outline a comprehensive roadmap for meeting the workforce needs of tomorrow.

But leaders should espouse one vital workforce tool that’s currently missing from the strategy: the work opportunity tax credit.

For nearly three decades, the WOTC has provided employers with an incentive to hire individuals from groups that face significant barriers to employment—such as Supplemental Nutrition Assistance Program recipients, disabled veterans, second-chance workers, and those receiving Temporary Assistance for Needy Families. In most cases, employers who bring these workers on board can claim a one-time maximum tax credit of $2,400.

While the credit itself is modest, it has a significant impact on the US economy and in local communities. It helps businesses offset a portion of wage costs and encourages them to open their doors to individuals who otherwise might be overlooked. For workers, the WOTC creates a pathway into the labor force, offering the dignity of work, financial independence, and a chance to contribute to the country’s growth.

Despite low unemployment rates, the US labor shortage persists. Employers across sectors—from hospitality and retail to construction and manufacturing—are grappling with millions of unfilled positions. Early retirements, restrictions in legal pathways to work, limited childcare access, and changing demographics have combined to create a persistent labor gap.

The WOTC addresses this challenge directly, but it’s set to expire at the end of this year. If Congress fails to extend the program, employers will lose a critical incentive at the very moment they need every available worker. Allowing the credit to lapse would hurt businesses and deny opportunities to those seeking to enter or re-enter the workforce.

The credit also needs to be expanded. Since its creation in 1996, it hasn’t been meaningfully modernized. Its value has remained stagnant even as wages and training costs have risen.

The bipartisan Improve and Enhance the Work Opportunity Tax Credit Act, introduced by Rep. Lloyd Smucker (R-Pa.) and Rep. Steven Horsford (D-Nev.) alongside Sen. Bill Cassidy (R-La.) and Sen. Maggie Hassan (D-N.H.), seeks to update the WOTC by aligning it with the current economic climate.

Such reforms would strengthen the credit’s impact. But at a minimum, the program must be extended—and ideally made permanent. Doing so would encourage employers to hire from underserved populations, strengthen workforce participation, reduce reliance on government assistance, and fuel economic growth.

The Trump administration’s workforce strategy sets a bold agenda with emphasis on apprenticeships, mobility, accountability, and innovation. The WOTC could accelerate progress toward the administration’s goals.

Congress and the administration should champion this as a centerpiece of its workforce strategy and prevent the decades-old credit from expiring. It would help employers struggling to find talent and open the door of opportunity to millions of Americans eager to work.

Preserving—and strengthening—the WOTC is essential to addressing the labor shortage and expanding economic mobility in the US.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Misty Chally is CEO of Capitol Solutions LLC and executive director of the Critical Labor Coalition.

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