Stuck in 1996: Why the Work Opportunity Tax Credit Desperately Needs an Update

Stuck in 1996: Why the Work Opportunity Tax Credit Desperately Needs an Update

Since its inception in 1996, the Work Opportunity Tax Credit (WOTC) has been one of the most targeted hiring incentives available to employers in the United States. It rewards businesses that hire individuals from historically underrepresented and economically disadvantaged groups, such as veterans, long-term unemployed individuals, and SNAP recipients, by offering federal income tax credits.

But nearly three decades later, the WOTC program has a fundamental flaw: it has never been adjusted for inflation.

The Credit Amounts: $2,400 to $9,600, But Stuck in the ’90s

The WOTC program provides different maximum credit amounts depending on the target group:

Most employers earn $2,400 per eligible new hire, especially when hiring from the general WOTC population. For example, a SNAP recipient who works at least 400 hours can generate a $2,400 credit. In high-impact cases, such as hiring a disabled veteran, employers can earn up to $9,600, the maximum allowable credit under the program.

These amounts were meaningful when the program began in 1996. But in today’s economy, with dramatically higher wages, benefits, and overhead, their value has eroded significantly. A $2,400 credit in 1996 had the buying power of nearly $4,500 in 2025, while the $9,600 veteran credit, once worth nearly a full quarter’s salary, would need to be nearly $18,000 today to maintain its original impact. In other words, employers are receiving roughly half the value for the same qualifying hire, with no inflation-based adjustment built into the program since its inception.

WOTC vs. Other Tax Programs: No Inflation Adjustments

Unlike WOTC, other major tax programs have evolved:

• The Earned Income Tax Credit (EITC) is indexed annually for inflation.
• The Child Tax Credit and standard deduction also increase regularly to maintain relevance.
• The R&D Tax Credit has been modernized repeatedly to reflect new industries and cost structures.

WOTC has remained untouched. The credit amounts are fixed in statute and have not been updated since the program’s inception in 1996. This includes both the $2,400 base credit and the $9,600 maximum, which now deliver significantly less value than they once did.

A Glimmer of Hope: Legislation to Modernize WOTC

Thankfully, policymakers are beginning to take notice.

One bill, the “Improve and Enhance the Work Opportunity Tax Credit Act”, aims to modernize WOTC by:

• Increasing the base credit amounts across target groups
• Indexing the credit to inflation, so it remains relevant over time
• Expanding the definition of eligible groups to better reflect today’s labor market
• Simplifying the compliance process, making it more accessible to small and mid-sized employers

If passed, this would be the first real modernization of the WOTC program in nearly 30 years.

Why It Matters Now More Than Ever

Labor costs are rising. Retention is a challenge. And inclusive hiring practices are critical to long-term workforce development.

Yet the incentive structure supporting these efforts has been frozen in time.

• In 1996, the federal minimum wage was $4.75 per hour
• Today, many employers pay $15 to $20 per hour just to stay competitive
• A $2,400 tax credit no longer offsets the cost of hiring and onboarding in a meaningful way
• The $9,600 credit for hiring a disabled veteran, while still the highest in the program, has lost nearly half its original value over the last 30 years

For employers to continue prioritizing the hiring of disadvantaged individuals, particularly in industries like home health, hospitality, food service, and staffing, the incentive must match the current economic landscape.

The Administrative Burden Adds to the Problem

To make matters worse, the WOTC program is still entirely manual and fragmented, requiring employers and consultants to submit applications to more than 50 state workforce agencies, each with its own portal and process, and no API support. Tracking submissions, checking statuses, and appealing determinations must all be done manually.

Pair that complexity with outdated credit values, and the return on investment of participating in WOTC drops significantly, especially for smaller employers without dedicated HR or tax credit teams.

Conclusion: Time to Adjust WOTC for Today’s Economy

The Work Opportunity Tax Credit remains one of the most impactful hiring incentives available to U.S. businesses, but only if it evolves.

• The $2,400 and $9,600 credit amounts must be modernized to reflect inflation
• Future adjustments should be automatic, tied to wage indexes or cost-of-living metrics
• Administrative modernization, including APIs and national portals, would further reduce the burden for employers and consultants

With legislative efforts like the Improve and Enhance the Work Opportunity Tax Credit Act gaining momentum, now is the time for bipartisan reform.

Let us stop treating WOTC like it is still 1996, and give employers a real, modern incentive to do the right thing.

If your business supports WOTC reform or wants help navigating the current system, Rockerbox is here to help. We simplify the complexity, maximize your credit capture, and advocate for a smarter future for this critical program.