In November 2017, da-Gov. Scott Walker (left), Foxconn chairman Terry Gou, and so-U.S. Congressman Paul Ryan applauded an agreement for the Taiwanese electronics manufacturer to build a massive manufacturing campus in Wisconsin. In the past week, uncertainties have arisen about the project's feasibility, which is based on $ 4 billion in state and local subsidies. (Photo: MICHAEL SEARS/MSEARS@JOURNALSENTINEL.COM)
When fiscal conservatives examine the government's incentives to lure industries and create jobs, they often find that taxpayers end up paying huge sums they never resume.
"There are many bad programs out there that should go away and we should be in advance about it," said Greg LeRoy, director of Good Jobs First, a group based in Washington, DC that tracks corporate subsidies.
Was Wisconsin's record-breaking $ 4 billion package of tax breaks and subsidies for Foxconn Technology Group one of the bad programs?
That question flared again in recent days, when the news exchanges reported that Foxconn was planning to either slow down or suspend its plans for a massive liquid crystal display plant in Racine County. Foxconn on Friday said it still planned to move on with the plant.
Timothy Bartik would answer the question this way:
"It is unclear whether the benefits will ever be as good as the incentive costs," said Bartik, senior economist at the Michigan-based Upjohn Institute for Employment Research, which studies subsidies. "It was a very unusual deal."
The discussion about what kind of investment creates jobs, and whether these jobs will exist when the subsidies expire, lies in the debate. The bets are second to none with the Foxconn agreement, which Wisconsin Economic Development Corp. unveiled in 2017 as "the largest corporate attraction project in American history as measured by jobs."
But the Foxconn project has evolved since then. Last year, Taiwan's headquarters consumer electronics manufacturer returned its plans to build a factory that would produce state-of-the-art panels, and opted for a less expensive plant that would create screens for smaller devices such as phones and tablets.
The uncertainty makes it difficult to calculate cost per job. At the low end, professor Jeffrey Dorfman, professor of the University of Georgia, calculates that state taxpayers pay $ 230,000 per promised job, but it is believed that all 13,000 jobs are materialized, as promised under the original terms. And Dorfman's analysis only counts $ 2.85 billion from state taxpayers and not the tens of millions committed by Racine County and local municipalities.
Counting all state and local subsidies, Wisconsin will pay Foxconn many times more than the average incentive offered in the United States, according to Bartiki's analysis.
The state's contract includes payroll tax for work solution, which subsidizes 17 per cent of wages. But when other investment taxes, which are set out in the contract, are added, Bartik estimates that the cost of Wisconsin taxpayers can be much higher. It includes state aid, but not county and municipal assistance.
There is a big deviation from previous practices when Wisconsin and most other states, on average, only subsidized about 3 percent of salaries, he said.
The national norm was even lower earlier to the turn of the century when states paid as little as 1 percent of their wages on average, said Bartik, who has studied subsidy-driven economic development since the mid-1980s. "If states like Wisconsin ever had rules and formulas to control the subsidy policy, the rules went out of the window with Foxconn," Bartik said.
"If this sets a precedent for what other states do, it will really be problematic," Bartik said.
And in terms of state aid policy, Bartik added:
"Rule # 1 is having rules" intended to ensure that tax breaks and subsidies can be replicated and maintained throughout the economy to include more industries and "without breaking the bank. "
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Wiscon's contract with Foxconn states that the state only pays subsidy is m hen Foxconn meets job placement goals. Because Foxconn fell in 2018, Wisconsin has not yet paid state aid. There is another story in Racine County, which has already borrowed and spent $ 130 million for land acquisition, sewage, water and road works.
Looking for a production renaissance
Foxconn is based in Taiwan, but grew into the world's largest producer of consumer electronics from a base of manufacturing operations that has spread across the low continent of China, where it also has many of its research and development laboratories.
Then-Gov. Scott Walker, who thought of the Foxconn deal, justified the extraordinary cost of taxpayers and called Foxconn potentially transformative for the regional economy.
With a single bold effort, the Foxconn agreement promised the possibility of a Midwestern production renaissance, which ended with Wisconsin with its own niche in the consumer electronics industry that currently only exists in Asia. But Wisconsin had to pay dearly to win the competition for the company; The Foxconn agreement is the largest incentive package for a foreign company in American history.
In a statement sent to Journal Sentinel on Friday, WEDC said:
"The incentives offered to Foxconn, taking into account the real transformation effect a whole new industry would have on Wiscon's economy beyond direct job search and capital investment of a single company. "
WEDC said Foxconn's investment in Wisconsin goes beyond the Racine County construction site to innovation centers in Green Bay, Eau Claire and Racine; a business office in Milwaukee; and a $ 100 million joint venture with the University of Wisconsin to establish the Foxconn Institute for Science and Technology (FIRST).
"These additional investments in Wisconsin over the last 18 months have been made without financial disbursement of state," WEDC said.