Wisconsin & Foxconn: The Most Expensive Taxpayer-Funded Jobs Program In History
The people of Wisconsin gave Taiwan-based Foxconn a billion-dollar gift for Christmas, on top of $3 billion they had already promised the company. So far, they haven’t even received a thank-you card – just the promise of the most expensive taxpayer-funded jobs in history.
This summer, Wisconsin politicians announced they had lured a new Foxconn LCD flat panel plant to southeast Wisconsin with a $3 billion incentive package, in return for a $10 billion investment from the company. But, like many government giveaways to the corporate sector, the bill to taxpayers has gotten even bigger. The Wisconsin Economic Development Agency agreed to a significant reduction in Foxconn’s commitment, down to $9 billion. This was after the state legislature okayed the deal without nailing down the details.
The state legislative bureau estimated it would take 25 years – until 2043 – until the Wisconsin government received enough in additional tax revenues to match the initial $3 billion investment. At $4 billion-plus, the break-even point will recede even further into the future.
A former U.S. senator once talked about how government spends a billion here and a billion there, and pretty soon it adds up to real money. The Foxconn giveaway already adds up to a lot of money – close to $1800 per Wisconsin household, even in parts of the state that won’t benefit directly from the plant.
But Wisconsinites aren’t the only ones who will pay the tab. At between $250,000 and $1 million per job, the Foxconn deal will raise the entry stakes for every jurisdiction seeking to attract new investments – or perhaps even just to retain them. Just like the value of your home is determined by how much the house down the street sold for, the going rate for government giveaways to companies is based partly on how much other governments have demonstrated a willingness to pay.
The steep price Wisconsin has committed to paying to host Foxconn will ripple across other states and municipalities. In 2015 alone, state and local business incentives came to $45 billion, including tax credits, property tax abatements, investment tax credits, R&D tax credits and customized job training, according to the W.E. Upjohn Institute for Employment Research. And the cost has been going up; business incentives have more than tripled since 1990.
So the jobs may go to Racine County, but the price will be paid by taxpayers everywhere.
And the Wisconsin state government is not even sure what the full price is yet – or how many jobs they will actually be getting for it. The village and county where the plant is to be located have chipped in another $764 million in tax incentives. The state has also agreed to spend over $400 on new roads and road widenings and improvements to facilitate the plant. (Although some of these transportation improvements were anticipated eventually.)
Local residents don’t just get to pay for the boondoggle through their taxes; they can also expect to pay increased electricity rates. American Transmission Company has announced it will spend $140 million to build a new substation to provide electric power to Foxconn, with the cost to be charged to electricity customers in southeast Wisconsin.
How many jobs will the deal actually create? The notion of 13,000 jobs is actually a goal, not a guarantee. The legislative bureau acknowledged that some estimates place the probable payroll as low as 3,000. The agency tasked with holding Foxconn accountable has a history of failing to verify job-creation claims and rewarding companies that fall short of quotas, according to state audits. How long will the jobs actually last? Foxconn has launched an extensive commitment to automation and robotics, eliminating tens of thousands of jobs in China with the introduction of specially-designed “Foxbots” – with the stated goal of eliminating almost their entire global workforce.
Moreover, how many of the jobs will actually go to residents of Wisconsin – the people paying for the party? The legislative bureau had estimated that about 10 percent of Foxconn workers would be residents of nearby Illinois. But a preliminary analysis commissioned by the Wisconsin Economic Development Corporation estimated as many as half of the construction workers and Foxconn workforce could come from outside the state.
The most ironic aspect of the deal is that the biggest shortage the state’s economy faces is not jobs, but the people with the skills needed to perform them. “We need bodies,” Gov. Scott Walker has admitted. Actually, they need skilled people. So much so that Walker has pledged to spend $6.8 million on an ad campaign to help attract residents from out of state to work for Foxconn. The state will spend $20 million on worker training over two years to ensure a pipeline of workers for Foxconn – and for small businesses that lose employees to the massive plant.
Rather than investing in people, too many governments are giving money to corporations in the pursuit of jobs that may not last long and may never return the investment. Wisconsin is setting the pace right now with its multi-billion dollar giveaway to Foxconn. Maybe it is time for governments to kick the habit. Sometimes, just saying ‘no’ could be a viable strategy.