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Economies of Scale: Wisconsin's Foxconn Opportunity

8/11/2017

 
​Wisconsin has been in the global news lately with the announcement that electronics manufacturer Foxconn is considering the construction of a new factory in Wisconsin. Ostensibly creating up to 13,000 jobs, I can see why many people are excited about this possibility. As I researched this story, I found myself wondering who will be getting the best outcome from this proposal: Foxconn or the Wisconsin taxpayer?
 
As a proud Wisconsin resident and a business owner, I decided to investigate this deal to see if I thought it would be good for my state. Governor Walker seems to be proposing we bend over backwards to get Foxconn to build here. For example, beyond the $3 billion dollars in tax incentives, he also wants to fix a portion of the interstate highway near the proposed site. Now, I'm very glad to see our roads being repaired (after all, I use them every day), but I wonder where we will get all this money from. If we can find $3 billion dollars to beg a foreign company to come to our state, then surely we could have a balanced budget, right?
 
I am also concerned about the eagerness to provide broad reaching and vague environmental shortcuts to "speed the construction process." I know that people are eager for jobs but what will be the cost to our children and grandchildren?
 
Let's talk about price for a moment. Because the scale of these numbers is likely higher than what you or I typically deal with, let's put them into a more local perspective.
 
What does $3 billion dollars look like?
A billion of something is a big number. How big you ask? Well, let's say you wanted to buy 3 billion acres of land. That total area would be slightly large than 86 Wisconsin-sized states (Wisconsin is about 34.7 million acres). For comparison, the continental United States is about 2 billion acres. See what I mean about perspective? A billion of anything is a tremendous amount!
 
What do 13,000 jobs look like?
Take a look at population for these local cities and imagine that each resident works for Foxconn.
Thorp: 1,629
Owen: 931
Withee: 476
Neilsville: 2,430
Medford: 4,326
Cadott: 1,424
Stanley: 3,660
Total: 14,741 That’s a lot of new jobs!
 
What is The Potential Cost to Wisconsin Taxpayers?
Here are some points from a Wisconsin Budget Project report on the matter, courtesy of UrbanMilwaukee.com:


The cost to the state of the new tax credits (excluding other subsidies) could range from about $219,000 per job for 13,000 Foxconn jobs to $587,000 each if the new enterprise employs 3,000 people. – The average annual wage that Foxconn would be paying these employees? $53,000. Hmm, seems like Wisconsin’s taxpayers could be paying Foxconn four times what Foxconn is paying their new employees.
 
On top of the very substantial cost of the new tax credits, there’s the cost of existing tax breaks for manufacturers (which would already essentially zero out Foxconn’s corporate tax liability), plus the costs of huge local infrastructure investments, the cost of prioritizing work on the I-94 corridor, potential costs to state taxpayers from making a guarantee to cover up to 40 percent of local losses from spending for the project, and the unknown costs from unprecedented exemptions from environmental regulations. – So in addition to paying for Foxconn’s new employees, we’re also on the hook for local losses and damages from their environmental exemptions? With manufacturer’s like Foxconn already paying next to nothing in corporate taxes, how is this a good thing for Wisconsin?
 
I’m no tax expert but it seems to me that the taxes paid by those 13,000 new employees (to say nothing about what you and I pay) won’t be enough to cover this expense.
 
I am not against investing in business, nor am I against the creation of new jobs. What I am against, is paying a business to come to our state and give us less than nothing in return. And since the current proposal has nearly no protections for our state if Foxconn doesn’t live up to their meager end of the bargain, I say the price is far too high.

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