Tennessee employers share in record high tax breaks for hiring disadvantaged workers

Tennessee employers share in record high tax breaks for hiring disadvantaged workers

Out-of-work veterans, new hires also benefited

January 11th, 2017 by Dave Flessner in Business Around the Region

Burns Phillips, commissioner of the department of labor and workforce development for the state of Tennessee, speaks at a news conference Wednesday, Jan. 28, 2015, at the Denso manufacturing plant in Athens, Tenn. The company announced an expansion at the event.

Photo by John Rawlston /Times Free Press.

Tennessee employers took advantage of federal tax credits last year to hire 85,448 workers who were long-term unemployed, first-time workers, or military veterans out of work.

The Tennessee Department of Labor and Workforce Development said Tuesday the state awarded a record $225.4 million in federal tax credits in 206 to employers who hired workers from targeted groups which have consistently faced employment barriers.

Tennessee Labor Commissioner Burns Phillips said the number of employers using the Work Opportunity Tax Credits (WOTC) rose last year after his department transitioned to a more user-friendly online application. Not only did this expedite the process, it also eliminated the use of more than 700,000 pieces of paper each year, Phillips said.

"This tax credit is a benefit many business owners are unaware of and may forsake thousands of dollars in tax bill savings each year," he said. "This program is a win-win situation for Tennessee employers and workers. It puts folks having a difficult time finding work into new jobs and reduces the business owners' tax liability."

The tax credit, which was added by Congress in the mid-1990s as part of then President Clinton's welfare reforms, offers businesses a tax benefit for hiring workers who are likely to have trouble finding jobs. Veterans were added to the eligible workers list in 2011.

"Handled properly, this is an excellent credit for even very small businesses to try to snag," says Eva Rosenberg, the author of "Small Business Taxes Made Easy."

The program provides federal tax credit incentives, ranging from $1,200 - $9,600 for each employee hired from the targeted groups.

Food stamp recipients were granted the most tax credits in Tennessee last year, accounting for nearly 87 percent of the total number of persons helped by the program. Low-income TennCare recipients, ex-felons and veterans were among the other groups from which employers hired workers and got the tax credits.

Peter Cappelli, a professor of management at The Wharton Business School in Pennsylvania, said the grants have proven to be a cost-effective way to help move many Americans from welfare to work.

"Targeted wage subsidies appear to be among the most effective – for some analysts the most effective – labor market policy for getting individuals into jobs," Cappelli said in his 2011 study of the program. "The cost-effectiveness of the program is quite high because subsidies are only paid when targeted individuals are placed in jobs. "

Cappelli estimated that the benefits to taxpayers "are easily twice the magnitude of the maximum subsidy payment, suggesting that the WOTC quite likely more than pays for itself." Cappolli also said there is little evidence of employers trying to game the system by replacing existing employees with new hires who might qualify for the subsidies.

"We hope more employers take advantage of the WOTC program, surpassing last year's numbers," Phillips said in a statement Tuesday.

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.