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Wisconsin Won't Break Even On Foxconn Plant Deal For Over Two Decades (theverge.com) 309

Last month, Foxconn announced plans to build a $10 billion factory in southeastern Wisconsin in exchange for $3 billion in tax breaks. While the factory was heralded as a big win for President Trump and Governor Scott Walker, a report issued last week says the plan is looking less and less like a good deal for the state. In the report, Wisconsin's Legislative Fiscal Bureau said that the state wouldn't break even on its investment until 2043 -- and that's in an absolute best-case scenario. The Verge reports: How many workers Foxconn actually hires, and where Foxconn hires them from, would have a significant impact on when the state's investment pays off, the report says. The current analysis assumes that "all of the construction-period and ongoing jobs associated with the project would be filled by Wisconsin residents." But the report says it's likely that some positions would go to Illinois residents, because the factory would be located so close to the border. That would lower tax revenue and delay when the state breaks even. And that's still assuming that Foxconn actually creates the 13,000 jobs it claimed it might create, at the average wage -- just shy of $54,000 -- it promised to create them at. In fact, the plant is only expected to start with 3,000 jobs; the 13,000 figure is the maximum potential positions it could eventually offer. If the factory offers closer to 3,000 positions, the report notes, "the breakeven point would be well past 2044-45."
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Wisconsin Won't Break Even On Foxconn Plant Deal For Over Two Decades

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  • It wouldn't be happening otherwise.

    • the brat stop can use more people eating there!

    • Politics.. (Score:5, Insightful)

      by thesupraman ( 179040 ) on Thursday August 10, 2017 @09:40PM (#54988043)

      While that is possible..

      The major factor here is mostly votes I suspect.
      Basically the local politicians can use public money to buy 'jobs' (at obviously stupid prices, as ITS NOT THEIR MONEY, so they dont care).
      The locals get pummeled with 'we bought new jobs! tech ones even!!' in elections, and vote accordingly.
      The downsides for the politicians are small, and far in the future (never pays off, jobs evaporate, etc), so for them its a win.
      for the locals? not so much (to say the least).

      Remember folks, a politicians ONLY priority is to stay in power, or even better gain more power.
      They sometimes rationalize this to themselves as 'helping' because after all, they see themselves as the best person to be in power.

      The only rational solution is to vote against over pending politicians, however the majority doesnt see that, so it is bordering on impossible.

      Democracy only works when coupled with *personal* *responsibility*. As that has basically been eradicated in public office jobs throughout the west certainly (but not exclusively), democracy is now just a way to swindle the voters.

      Solutions to this are all shot down HARD as not being 'inclusive' or 'fair' - which is likely why the powers that be are pushing such concepts so hard these days (and no, I dont mean removing womens votes, so dont play that stupid strawman, there are plenty of incompetent voters from all genders, beliefs, walks of life..)

      Just remember folks, you are paying the Chinese to give you a few measly jobs back, and you are paying more than the jobs will ever return...
      Does it feel good?

      • Re:Politics.. (Score:5, Insightful)

        by ShanghaiBill ( 739463 ) on Thursday August 10, 2017 @09:52PM (#54988139)

        The "break even" in TFA is only based on tax revenue. Governments don't exist to collect taxes, they exist to serve the people. If you look at the overall gain in secondary business and employment the break even is way sooner than two decades.

        None the less, these tax breaks are really just a prisoner's dilemma. State offer them because other states offer them, but they would all be better off if no one offered them, and factories were optimally placed based on other factors. We would likely all be better off if there was a federal law to ban this nonsense.

        Just remember folks, you are paying the Chinese to give you a few measly jobs back

        Foxconn is not a Chinese company.

        • Re: (Score:3, Insightful)

          Also, a tax break is not an investment, it is simply fore-going funds they wouldn't get otherwise. There can be great return to the state outside of those taxes, including the employment of workers, their income taxes, and taxes on their spending. If they don't have the factory, they never get any tax revenue of course.
          • Re:Politics.. (Score:5, Informative)

            by PopeRatzo ( 965947 ) on Thursday August 10, 2017 @11:19PM (#54988615) Journal

            Also, a tax break is not an investment, it is simply fore-going funds they wouldn't get otherwise.

            Tax breaks mean that the public costs involved in starting up that new plant have to be borne by other taxpayers, other companies.

            You may not care about the free market, but this is a case of the government picking winners and losers.

            • Re: (Score:2, Insightful)

              by Anonymous Coward

              You make a flawed assumption that there's an actual cost to be born. Is a tax break against taxes you wouldn't have otherwise collected a major problem? That depends on a lot more than will be chosen in a deliberately biased analysis.

              • Of course there's an actual cost to be borne. There's the infrastructure upgrades required to support a large factory (power, water, etc.), additional roads to be built, etc.

                In my area, the last time we bribed a company to come here, between the tax breaks and the additional costs the city had to pay, the city just about broke even -- but out of sheer luck. The company had planned to close the factory as soon as the tax breaks expired, but it they weren't quite ready and so hung out for an extra couple of y

          • Re:Politics.. (Score:5, Interesting)

            by ShanghaiBill ( 739463 ) on Thursday August 10, 2017 @11:55PM (#54988759)

            If they don't have the factory, they never get any tax revenue of course.

            Many economists would disagree. If a labor pool is available, it is likely that someone else would invest or start a business there instead. So this factory may just be replacing one set of jobs with another. The difference is that the alternative jobs wouldn't get any tax breaks, so the people of Wisconsin might have been better off if they had declined Foxconn's offer.

            • Re:Politics.. (Score:5, Insightful)

              by Whibla ( 210729 ) on Friday August 11, 2017 @05:34AM (#54989557)

              Many economists would disagree.

              And many would agree, and many would disagree with both of the previous groups, and still more would disagree with all the others.

              Remember, economists assume everything except responsibility!

              If a labor pool is available, it is likely that someone else would invest or start a business there instead. So this factory may just be replacing one set of jobs with another.

              Except, of course, that free movement of labour is also one of the tenets of the free market. And, yeah, I know some people may not be able to move for 'social' reasons, but there's always plenty more people, somewhere, who can. So, other than starting a local business, the only reason to start is business there is because it's going to make more money there than starting it elsewhere.

              The difference is that the alternative jobs wouldn't get any tax breaks...

              Exactly my point above (Yes, you may call me cynical)

              ...so the people of Wisconsin might have been better off if they had declined Foxconn's offer.

              I suspect it's more a case that Foxconn said something like "We're going to be investing in a factory in the US, who's going to offer to 'benefit' from our largesse?" and the various states fell over themselves in an orgy of mutual back scratching: "We'll start the bidding at a 5% tax break, for 2000 jobs over a 10 year period", "No, come here instead, we'll offer a 10% tax rebate, for 3000 jobs, guaranteed for 10 years", and so on...

              And, just to return to the beginning: They say that Christopher Columbus was the first economist. When he left to discover America, he didn't know where he was going; when he got there he didn't know where he was; and it was all done on a government grant.

              • Remember, economists assume everything except responsibility!

                Micro-Economists are wrong about specific things.
                Macro-Economists are wrong about thinks in general.

                Supply, Demand, Competition. Thats economics. Full stop.

            • Many economists would disagree. If a labor pool is available, it is likely that someone else would invest or start a business there instead. So this factory may just be replacing one set of jobs with another. The difference is that the alternative jobs wouldn't get any tax breaks, so the people of Wisconsin might have been better off if they had declined Foxconn's offer.

              An interesting possibility. I don't know the region in question, but if there hasn't been anyone else showing interest for a long time that would be an indicator those alternate jobs might not materialize, and would be less likely to if you don't also compete with other states by offering tax breaks.

              • I was born and raised in the area, lived and worked in Kenosha for many years until I moved out of state. There is a large skilled work force in the immediate area, having been home to a LOT of manufacturing jobs for decades. Many of those employers are now gone (Massey Ferguson, Case, AMC, Chrysler, etc.) but many remain (Jockey, Snap On, SC Johnson, InSinkErator) and more have moved into the area (Amazon, U-Line). For someone who knows the area and its people, I can't think of a location better suited.
        • Re:Politics.. (Score:5, Interesting)

          by arth1 ( 260657 ) on Thursday August 10, 2017 @11:36PM (#54988675) Homepage Journal

          Foxconn is not a Chinese company.

          That depends on what you mean by Chinese. It's founded and headquartered in the Republic of China (Taiwan), which the US won't formally recognize as a sovereign country to avoid pissing off the People's Republic of China (China), who considers Taiwan part of China ("One China" doctrine). So there's a charade, where the US pretends it's dealing with a Chinese company, and Taiwan doesn't correct them, to keep everybody happy.

          • Average wage? (Score:2, Insightful)

            by Anonymous Coward

            An average wage of $54000 for factory workers? That's a good one! I've got this bridge you might want to buy,,,

            Translation: Thee executives each earn $40M and 3000 workers each earn $14.5K.

            • by arth1 ( 260657 )

              An average wage of $54000 for factory workers? That's a good one! I've got this bridge you might want to buy,,,

              It depends on the factory.
              I work for a company that employs a good number of factory workers. Most of these hold engineering degrees or similar, and earn in the $60-120,000 range. There are lower paid jobs too, like cleaning crews, forklift operators, mail operations and cafeteria staff, but those are fewer.

        • Re:Politics.. (Score:5, Interesting)

          by DRJlaw ( 946416 ) on Friday August 11, 2017 @08:35AM (#54990113)

          If you look at the overall gain in secondary business and employment the break even is way sooner than two decades.

          Ah, the secondary business scam -- the one where businesses claim large multiplier effects on secondary revenue and employment that mysteriously do not apply to other employers in the area since, if true for all, small business owners would be swimming in gold plated swimming pools and unemployment would be -50%.

        • Re:Politics.. (Score:5, Interesting)

          by Dan East ( 318230 ) on Friday August 11, 2017 @08:42AM (#54990143) Journal

          None the less, these tax breaks are really just a prisoner's dilemma. State offer them because other states offer them, but they would all be better off if no one offered them, and factories were optimally placed based on other factors.

          No no no no.... This is a global market. The option of placing this factory in the USA anywhere is dependent upon these tax breaks, as the amount of taxes, fees, regulations, etc, to create this factory in some other country is vastly lower. Think about this for a moment... the state is not GIVING them $3 billion dollars. The state is simply NOT TAKING AWAY $3 billion dollars in the form of taxes for some amount of time up-front. You think if this plant was in China there would be a $3 billion dollars in taxes collected from a plant like this? LOL on the contrary, the government would probably be footing or subsidizing the cost of building the plant in the first place.

          We would likely all be better off if there was a federal law to ban this nonsense.

          And on a totally different note, the federal government needs to keep its grimy hands off of state business. The States have the right to certain modes of tax, or not to tax as they see fit. I'm sick to death of people advocating the loss of States' rights just because it happens to result in a ruling that aligns with their personal philosophy. New Hampshire has no sales tax, instead they raise their taxes through real estate taxes. Other states have high sales taxes and low real estate taxes. Diversity and many different personalities and tax structures among the states is a very good thing.

      • Thanks for your reply. There's only one thing which needs to be added. The snow ball effect.

        Company gets tax break -> Builds factory -> More people move into town -> Wal-Mart (or other big company) gets tax break -> Moves into town -> Local businesses close -> No longer pay business taxes.

        Overall this means the $3 Billion is really a low-ball number.

    • by rtb61 ( 674572 )

      I seem to remember all are equal, it was the declaration of something or other but nope some pay tax and some do not and it seems some one oddly tied to political campaign donations but no one knows why ;D

  • I-94 North-South Freeway Project may be moved up!

  • Fake news (Score:2, Funny)

    by Anonymous Coward

    This is faked news. President Trump did FANTASTIC work bringing thousands of jobs to Wisconsin just like he promised. Once again we see how liberls twist and lie about basic facts to push their agenda.

    • While I realise your just joking. Its probably worth noting Foxconns interest in setting up in the US probably has more to do with increasing quality of life in China. Theres an entirely plausible future out there where americans struggle on terrible wages to make cheap junk for wealthy chinese.

  • At least with MA/CT, you pay state taxes to the jurisdiction that you work first, not where you live. You then take that money off of whatever you may owe the state you live in. This is actually good for the Wisconsin as other than the roads the only thing an out of state resident worker costs is road upkeep. A drop in the bucket compared to what residents taxes fund. Now you can talk municipalities losing revenues. But really their budgets are based on number of residents and is geared to break even for th
  • by 93 Escort Wagon ( 326346 ) on Thursday August 10, 2017 @09:55PM (#54988153)

    In previous years, Foxconn has promised to build other large plants in other US states - but never actually built them.

  • by Waffle Iron ( 339739 ) on Thursday August 10, 2017 @09:56PM (#54988157)

    The Fiscal Bureau did not consider the substantial savings that the Social Security and Medicare programs will realize over the years.

    Every employee that jumps off of the roof of the factory will save the state well over $100,000 in retirement benefits that will never need to be paid, which will make the break-even point much sooner. That's why part of this deal stipulates that the plant buildings must all be at least 15m tall, and they must be directly abutted on all sides by concrete pathways.

    • by ghoul ( 157158 )

      The analysis also does not count the money that local manufacturers of safety nets will make selling anti-suicide nets to the factory. Enough suicide nets and the breakeven point comes closer.

    • Concrete pathways are not sufficient. A small percentage survive with expensive life long injuries thus counteracting the savings. They must be bordered with a 10 foot border of 10 inch rusty rebar spikes, with the 15m fall sharpening is not required.
  • by whoever57 ( 658626 ) on Thursday August 10, 2017 @10:02PM (#54988193) Journal

    Wisconsin Won't Break Even On Foxconn Plant Deal

    FTFY.

    Or to be really clear:
    Wisconsin Won't Ever Break Even On Foxconn Plant Deal

  • It's called Alt-Right Conservativism, you give a ton of Tax Payer money to a foreign company to open a factory, they open the factory for a few years then automate the jobs away and walk away with all the Billions of tax payer money. The tax payers are fucked over and rich people get richer, what's not to like?

    • by LynnwoodRooster ( 966895 ) on Friday August 11, 2017 @02:55AM (#54989195) Journal
      From what I read, Foxconn only gets an annual credit IF they employ a certain amount of people in the first place. So when they automate - they stop getitng credits. They don't get bilions up front, they get it paid out over years. Years in which they have to employ so many people to get the credit in the first place.
      • I would add that they don't get anything "paid out" ever. This is money that the government declines to collect.

        I'm doing some napkin math here - 3 billion divided by 20 years is 150 million per year. If we figure that an idle body costs the state of Wisconsin $30,000 per year in programs, benefits and lost taxes, which is probably a low estimate, how many jobs to break even? 5000.

        • "We reduced the government gut punching we do to a business a little bit. A loss to us!"

          This "logic" only flies if you view government as a profit center rather than a facilitator, which is the original reason a free people create a government.

    • Nope! They get the credits if and only if they hire all the people they promised to, and do all the construction they promised. That's 13,000 people making an average of $54k/year, or Foxconn has to give it all back.
  • by RhettLivingston ( 544140 ) on Thursday August 10, 2017 @10:20PM (#54988325) Journal

    Assuming it even gets built - the lifetime of these highly automated plants is not two decades. It will need to be rebuilt in order to not close down prior to that point. There will be a whole new set of "incentives" at those points in time to keep the plant.

    But, the construction companies - often owned by the associates and family of local politicians - will make a killing. The "incentives" likely won't even cover their planned cost overruns. That's all that matters to the powers that be - the kickbacks and other gains to be made during the up-front expenditures.

    The goal of those in power has been reached when the construction money has been spent.

    Does anyone not understand that our President is in the business of real estate?

  • by pedz ( 4127433 ) on Thursday August 10, 2017 @10:25PM (#54988353)

    10 - 3 = 7. It sounds like Foxconn is dumping $7B into the state. How long will it take the state to break even from the $7B opportunity cost?

    50 years ago, IBM came to Austin and set up shop. Texas Instruments followed. At this point, it is a thriving tech mecca sucking many people away from Silicon Valley. Why?

    Its not just because of IBM but it is also because of the "pro" business attitude of Austin and Texas in general. At the same time, California has become fairly hostile to business resulting in a carrot and a stick: Texas offering the carrots and California whipping with their sticks.

    Yes... there are pros and cons to each side but you either want growth or you don't. If you don't want growth, that's fine but politicians would run on "no growth" platforms if that were the case. But they don't because generally growth is considered progressive, positive, futuristic, blah blah blah. Voters vote pro-growth. The confusion comes when they find out that pro-growth equates to pro-business. Then they have ambivalence and second thoughts.

    Wisconsin could build upon this seed and over the next 50 years build up to a viable competitive center for high tech manufacturing; or... they could botch it.

    $100 says they botch it.

    • by whoever57 ( 658626 ) on Thursday August 10, 2017 @11:52PM (#54988747) Journal

      50 years ago, IBM came to Austin and set up shop. Texas Instruments followed.

      And how many employees do those companies have in Austin now? For TI, how many ever?

      10 - 3 = 7. It sounds like Foxconn is dumping $7B into the state. How long will it take the state to break even from the $7B opportunity cost?

      The naivete of people here never fails to amaze me. Or is it ignorance, or even shilling?

      Foxconn is going to spend $10B, but how much of that will be in the state? They will buy equipment, materials, expertise and more from out of state; perhaps even out of the country. For all we know, they might be spending $9B on a license to build products from their parent company.

      It's a race to the bottom and the end result is that there is no money left for the state to operate. Why should not every company in Wisconsin demand a tax break of a similar magnitude, under threat of moving to another state?

      • Why should not every company in Wisconsin demand a tax break of a similar magnitude, under threat of moving to another state?

        For the same reason you can't just go out and bluff yourself out of every poker hand.
        A lot of companies can't just uproot and move.

    • On the list of states with the most industrially-caused air pollution, Texas is third. California, which has a bigger economy, doesn't even crack the Top 20.

      But hey, breathable air is for hippies and tree huggers, right?

  • The best thing for Wisconsin would be for this to end up like the Foxconn factory in Harrisburg, Pa - they didn't build that one.

  • The government of the State of Wisconsin doesn't exist to "break even" or make a profit. They exist to serve the people in the state. A huge factory directly employs thousands, and indirectly employs many more at support businesses and businesses that will provide goods and services for Foxconn employees.

    If Wisconsin becomes a prime location for manufacturing of display panels, it will be a huge win for the people of the state, regardless of whether Foxconn ever pays a dime in tax.

    • Re: (Score:3, Insightful)

      by Anonymous Coward

      Uhm, yeah. That's exactly their point. If they wanted to they could pay thousands 240,000, and not have polluted rivers that downstream will pollute Chicago and Lake Michigan even more. That would be serving the people.

  • by Weaselmancer ( 533834 ) on Thursday August 10, 2017 @11:16PM (#54988593)

    In the short term, looks like a win. It's just enough to wave in front of his fans and claim he's making America great again. Made a deal, brought in 3000 jobs, hooray a win.

    15 years from now when it closes, still not having made back the tax break that brought it here in the first place? Not the part he's interested in.

  • by jsepeta ( 412566 ) on Friday August 11, 2017 @02:10AM (#54989093) Homepage

    I doubt Foxconn will keep the factory operational for 20 years. We're moving into an era of robotic automation, and those 3000 jobs will not last 30 years.

  • Wisconsin is applying the same form of governmental logic that motivates cities to build expensive stadiums to give away to sports franchises. Taxpayers have to hope that Foxconn innovates enough, such as by making robotic assembly better and cheaper than the slave assembly the company has been famous for at home, to make the deal pay off sooner.

  • Won't Break Even On Foxconn Plant Deal For Over Two Decades

    Sounds much like installing solar panels on your roof — barely even after decades with governmental subsidy [theecoexperts.co.uk], ruinously expensive in a free market.

    • Did you even look at your own link? It appears to contradict what you're saying. Here...let me help you:

      "Despite recent cuts by the government to the Feed-in Tariff, plummeting solar costs mean that solar panels are still cost effective and will deliver earnings and savings of around £8,080 over 20 years on average. "Although solar panels under the old Feed-in Tariff in 2015 used to earn households around £13,450 over 20 years, falling solar costs mean that in 2016 typical return

  • by Tighe_L ( 642122 ) on Friday August 11, 2017 @01:09PM (#54992067) Homepage
    Think of all the other jobs that it would create supporting the local community, restaurants, stores, etc. There's more the it than just State Tax revenue. It' also dumb because the state wouldn't me making anything if Foxcon didn't move there. It's not lost revenue. MAN.
  • Business, disrupted (Score:3, Interesting)

    by Manqueman ( 5038943 ) on Friday August 11, 2017 @02:36PM (#54992729)
    I remember the old days when someone would start a business, maybe take out a loan to do so, maybe not, then manage the business to make profit while paying a reasonably fair wage, maybe provide health insurance. Apparently that’s no longer considered the proper way to manage a business. Going public with an unprofitable business is considered the right way as well as shaking down the government for handouts as perks. Me, I can’t understand how the new way is better for society. (Yes, I understand that the Foxconn deal, were it to actually happen, would probably be a net good for the hires, but I don't see how the state benefits.

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