Working On Welfare

Taxing Matters

The federal government has also begun offering a number of tax subsidies to further entice employers to hire welfare recipients. The Work Opportunity Tax Credit was reauthorized in August to give a federal income tax credit to businesses that hire people from one of eight target groups, including welfare recipients, between October 1, 1997, and July 1, 1998. Business owners can obtain a credit of up to $2,400 for each eligible new employee.

The Welfare to Work Tax Credit is a new deduction that earns employers as much as an $8,500 tax credit for hiring long-term welfare recipients between December 31, 1997, and May 1, 1999. Businesses must keep the workers on staff at least 400 hours, or 180 days, to be eligible for the credit.

In addition to the tax breaks, in fiscal year 1998, the Department of Labor will award $400 million in competitive grants to private entities to fund programs that move welfare recipients into unsubsidized employment. Because the private entity must submit the grant application in conjunction with its local Private Industry Council (these councils administer welfare-to-work programs in more than 600 locations nationwide) or political subdivision (an area such as a city or county that has its own government officials), this is an excellent way for a small business or group of companies with a need for labor and an innovative training, transportation or child-care program to obtain government funding for a project.

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This article was originally published in the January 1998 print edition of Entrepreneur with the headline: Working On Welfare.

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