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Memo: Foxconn cost to Wisconsin nearing $4.5B
- s73ver_ 9y agoSo, when employees want a raise from their employer, they generally have to work at the higher level for a while before they get the raise. Essentially working at a discount for a while, until the employer has decided to give the raise. Why don't we require the same of companies asking for tax breaks? We'll give you the tax break AFTER you've been around for a bit, and you've proven that you're worth it, and that you'll actually do the things you promised you'd do.
- maxxxxx 9y agoBecause somebody else will give them the tax break before they have been around. It's a race to the bottom.
- deleted 9y ago[deleted]
- withdavidli 9y agoThe best time to negotiate is before you start.
- cptskippy 9y agoI thought it was after you got them to sign the contract?
- patio11 9y agoPredictably, $3 billion is simply a negotiated discount on fees in return for Foxconn choosing Wisconsin over a state not willing to discount fees.
- throwawayjava 9y agoI understand what you're saying, but I think you're wrong, for two reasons. 1. There's a reason that foxconn wants to manufacture in the USA, and there's a reason they're courting states in the great lakes region. Resolving the Prisoner's dilemma becomes much easier when there are ~3 states with viable sites as opposed to 50. 2. See guelo's comment. Your point is well-taken in general, but in this particular case, IMO, it really is a stupid giveaway.
- nathantotten 9y agoIt is worth noting though that some of these costs are simply tax credits for revenue that wouldn't be collected if the factory isn't build. So they are comparing the "cost" to a basis that assumes the factory gets built and pays normal taxes. Items in that group are: * State tax credits, $2.85 billion * Local government incentives, $764 million[1] * State sales tax exemption, $139 million When you add back the revenue that would be generated from 13,000 jobs the state will come out well ahead. Note, I am not in favor of the government picking corporate winners, but I think it is fair to clarify that the state of WI is not paying FoxConn or pulling money from other places (at least in a large portion of the line items). [1] I don't know what this actually is, but I would assume it means tax credits based on various metrics (i.e. jobs created).
- apcragg 9y agoThe counter point to that is that the Foxconn being there costs the state money in infrastructure and other non-fixed costs compared to not being there at all.
- nathantotten 9y agoValid point, but the article doesn't mention anything like that. :)
- chiefalchemist 9y agoIt doesn't cost the state anything. It costs the tax payers. Parsing words? Not really. Just wanting to use truthful and transparent language.
- guelo 9y agoThat's just not helpful. Money circulates around the economy. If I buy a $10k car I don't say the car cost my employer $10k.
- chiefalchemist 9y ago
- deleted 9y ago[deleted]
- partycoder 9y agoNote it's a cost not a loss. There's a difference. I hope there's a good return on investment in a reasonable amount of time.
- ngharo 9y agoI hope it's better than giving $100,000 in credits to 30,000 small businesses in the greater Milwaukee area.
- partycoder 9y agoThis is an attempt to set a precedent of successful investment on American manufacturing. Is this idea in particular viable? Probably not.
- moorhosj 9y agoThis doesn’t make sense, Foxconn already publicized their intention to create these jobs. The incentives just made it more economically feasible for them to do it in this state. Race to the bottom is a phrase that comes to mind.
- partycoder 9y agoMany countries give short-term incentives to attract long-term foreign investment. Some countries go as far as providing guarantees for investors in their constitution.
- bduerst 9y agoDeveloping countries, sure, and they run a huge risk of propping up an unsustainable economy. Especially when those incentives run out. Just look at how Argentina's incentives for Blackberry panned out: https://www.npr.org/2017/02/23/516895101/when-argentina-elected-a-populist-president-some-companies-left-the-country https://www.npr.org/2017/02/23/516895101/when-argentina-elec...
- oneplane 9y agoWould make more sense to just hand the money to the people that would get those 'jobs' and be done with it?
- bduerst 9y agoOr giving $4.5 Bn tax credits to SMBs across the whole state, instead of just one business in one town in the furthest corner of the state.
- PeterStuer 9y agoOr create jobs with it to clean up the environment or service people that need help.
- quasse 9y agoSeriously. As a resident of the state in question, I'd much rather see 4.5B used to directly hire people to work on our roads, state parks, and other public resources.
- mfe5003 9y agoIn my opinion, environmental regulation exemptions are the real cost to the state[1]. Not to mention its kind of weird to give out an exemption, if the standards are being lowered why is it just for this one entity? [1] https://www.wpr.org/wisconsin-foxconn-deal-waives-environmental-regulations https://www.wpr.org/wisconsin-foxconn-deal-waives-environmen...
- clarkevans 9y agoI've never heard of anything like this. Is this common? (1) Let Foxconn discharge dredged materials or fill wetlands without a permit. The provision would apply not only to wetlands Foxconn fills when it's constructing its 1.6 square mile complex, but also to wetlands it fills once its new facility is fully operational. (2) Exempt the company from another state law that requires businesses to create new wetlands when they get permits to fill existing ones. (3) Allow Foxconn to change the course of a stream, or straighten a stream without a permit. (4) Let Foxconn build on a lake or stream bed without a permit. (5) Sidestep a state law that requires environmental impact statements before businesses can begin construction. (6)Let public utility projects begin for the Foxconn complex without approval by the Public Service Commission. Also, Foxconn gets "refundable tax credits" -- does this mean state could end up paying FoxConn cash (not merely a break on taxes)? is this also common? I wish every small business could be paid to create jobs.
- jrs235 9y agoInteresting. What stops foxconn from inserting itself (and "selling" services) to buy a bit of land, fill in wetlands, change stream courses, build a lake, etc., then sell the "improved" land to another company? Maybe even begin construction of buildings to then be sold to someone else?
- tw04 9y agoNothing. Scott Walker is one of the most openly corrupt politicians to ever stay in office. He probably has a back end deal with a"family friend" to make this happen.
- chiefalchemist 9y agoOn the bright side, it's pocket change compared to the F-35. Https://politico.com/story/2014/02/f-35-fighter-plane-costs-103579
- maxharris 9y agoThis is all based on the premise that the $2.85b in tax revenue automatically belongs to the state in the first place. I understand that most people agree with the above view, and they have what they believe are good reasons to think that. (And no doubt many will reply with these reasons...) But I don't agree. I don't think that any such forcible takings are justified. If people want (as I do) a government to protect them from a Hobbesian nightmare, let them choose to pay for it voluntarily. Such a government could publish lists of people who have paid, and how much they chose to pay, and maybe with a brief description or statement outlining why. People could then choose for themselves whether or not to have dealings on people on the basis of what they find in that list. One benefit of this is that you could say, "not a dime from me because you're invading Iraq," or "none of my money may be used to fund executions, drug prosecutions..."
- trhway 9y agoAnd it should be published on blockchain of course.
- devoply 9y agoAny such scheme you run into free rider problems. If I am low income I feel justified in not paying at all. Where something like half of the income tax revenue comes from people considered to be poor.
- maxharris 9y agoFree riders with no money are fine. And for someone with huge holdings that attempts to free ride? That's exactly what that list is for.
- jonathankoren 9y agoThat doesn't solve anything. All you've got is public shaming, and if history has been any guide, the ability to be shamed may be one thing that's anticorrelated with money.
- prawn 9y ago
- deleted 9y ago[deleted]
- angel_j 9y agoAnd Steve Jobs told Barack Obama those jobs weren't coming back!
- mikeash 9y ago13,000 jobs is essentially indistinguishable from zero if you're looking at a national scale.
- batushka2 9y agoLook at it as an icebreaker - just 1 year passed, 7 more left.
- mikeash 9y agoManufacturing jobs have been steadily increasing for the past eight years, adding over a million jobs in that period. What ice is there to break, and how is a mere 13,000 going to break it? Jobs data: https://data.bls.gov/timeseries/CES3000000001 https://data.bls.gov/timeseries/CES3000000001
- redorb 9y agoI think this kind of subsidy is only slightly better than sports stadiums. They both are shades of the bad parts of capitalism. If only all states could agree to not give preferential treatment via tax subsidies. It'd be nicer for companies to pick their location based on geography and work force along with tax reasons.
- Craven 9y agoI don't really think you can call this a "bad part of capitalism". States competing in a market for the patronage of large factories/firms is quintessential capitalism. All states agreeing not to offer tax subsidies would be classic cartel behavior, and would encourage more labor moving overseas. Now if their is evidence of Foxconn giving the WI legislate kickbacks, then I agree, this kind of stuff would be pretty nasty.
- leggomylibro 9y ago>If only all states could agree to not give preferential treatment via tax subsidies. Any reason a Federal law couldn't do that? Most states agreeing might be good enough.
- duxup 9y agoStates have latitude on how they tax. I'm thinking it would be a debate as to how much latitude and who could restrict them.
- mstodd 9y agoCareful badmouthing sports stadiums in WI.
- oftenwrong 9y ago$4.5B + the long term liability of maintaining all the new infrastructure Wisconsin is already far behind on the infrastructure maintenance front.
- nickysielicki 9y agoI am a Wisconsinite, and I voted for Republicans that are pushing this into place. This whole thing stinks and I'm upset about it. I voted for job creation through lower taxes, not job creation through direct corporate handouts and bribery. Outside of principled arguments against this sort of thing, one blatant issue is that Wisconsin taxpayers are paying for something that bolsters job creation in the Chicago Metropolitan Statistical Area. Racine is not Milwaukee, Racine is Chicago. The jobs being created and the local economy stimulus are going to spread to Elgin and Waukegan before it makes its way to West Bend and Janesville. edit: also, why is this on HN?
- deleted 9y ago[deleted]
- 549362-30499 9y agoAt the risk of taking this wildly off-topic, how you reconcile the massive failure of low taxes = jobs = more revenue in Kansas state politics over the last few years? Is there something about Kansas that makes that lesson not apply here?
- nickysielicki 9y agoAny kind of response I would give here would just be regurgitation of junk articles I've read, sorry.
- deleted 9y ago[deleted]
- conanbatt 9y agoKansas is a good example to take a look at, but I'm not quite convinced of what went down there. To the very least, it was very sudden and the benefits of lower taxes and increased employment cannot be immediate. Businesses change their expectations on daily decisions, not throw all the plans out the window on a tax reform. There are questions: where did the tax money saved go? Did people hoard it? did it go out of state? It merits some analysis. Trickle-down is a moniker for an economic policy that is pretty straight forward: that which is not spent by the state its spend by the constituents.
- a2tech 9y agoGetting Foxconn to Wisconsin is going to end up being a ridiculous boondoggle. They’ll reap the rewards of massive tax cuts and Wisconsin will never see any upside.
- blisterpeanuts 9y agoJobs are not an upside?
- kristopolous 9y agoNearly everything creates jobs. An uptick in car crashes or a catastrophic flood would create crisis management jobs and all the insurance and construction infrastructure jobs that go with it. Exxon Valdez was the most job creating oil tanker to ever sail. Think of the thousands of jobs that have been created to clean that up. "creating jobs" is a placeholder for "economic activity" with the benefit of always making it appear positive. It's a euphemism that's used when nothing more legitimate can be found. In the business context it's insidious in yet another way. Deals and contracts that will make certain privileged people gobs of money is presented as "job creating" because people are needed to execute the deal or do the dirty work. In this case, the Wisconsin tax payer is paying $1,500,000 to foxconn for each job. The focus is removed from the cost to society, who benefits the most, or the structure and merits of a particular event. They get papered over with the economic equivalent of rainbows and puppies: "job creators".
- brndnmtthws 9y agoJobs jobs jobs
- blisterpeanuts 9y agoSpoken like someone who has a job. There are hundreds of thousands of people in this country who could use the work. Why limit their opportunities?
- kristopolous 9y ago
- product50 9y agoTax credits are not costs. If Foxconn didn't come to Wisconsin none of that money wouldn't be realized. On the other hand, there is very little info in the article on how having a Faxconn facility there will help with the direct benefits which job creation brings. Relatively speaking, the LA Rams stadium actually cost the LA county $2.6B and there are few direct revenue benefits of it. Otoh, having a city NFL, one can argue increases citizen happiness, which is why this might be worth the investment.
- rtpg 9y agoThere's the third option of Foxconn building the factory in WI despite there not being tax credits offered. Very few would make the argument that the EITC doesn't cost money because without it people wouldn't have kids. There's likely a correlation, but it's far from an "all or none" situation. The "simplest" thing to do is to recognize tax credits as expenditures, because it balances things out pretty well and is probably closer to reality. The reality where companies build factories because they need them, and tax credits help but aren't the main reason. (Thought experiment: we outlaw tax credits for building factories worldwide. Do factories stop getting built entirely?)
- nothrabannosir 9y agoYour thought experiment already alludes to this: states can compete. If anything, the only thing that was “really” lost, practically, is the difference between WI and the second best offer. There is no way a company with choice would ever go for a state which unilaterally put its foot down. You need an authority to say: no more credits. Or to otherwise put a quota on credits. That would balance things out. But until they do, it’s a tragi-economic race to the bottom. Nash equilibrium and all that :(
- oarsinsync 9y agoSee the prisoner's dilemma. In the short term, the most likely way to win is to ensure everyone loses.
- 9y ago
- jstewartmobile 9y agoWill Racine get the suicide nets up-front, or will that have to wait until... later? http://www.telegraph.co.uk/news/worldnews/asia/china/9006988/Mass-suicide-protest-at-Apple-manufacturer-Foxconn-factory.html http://www.telegraph.co.uk/news/worldnews/asia/china/9006988...
- blisterpeanuts 9y agoThe title is misleading; Foxconn's plant is not costing Wisconsin anywhere near $4.5 billion, according to the article itself. In reality, the state is outlaying very little money to bring in this company, probably about $20 million total. Even the interstate improvements are cited as previously planned and not a special accommodation to Foxconn, except that it was moved up in priority. Tax exemptions and credits are a common method of enticing businesses to set up shop. The notion that this somehow "costs" the state is mere rhetoric with no factual basis. The money the state is supposedly losing by not taxing the plant never existed. If Foxconn never moved there, there's zero potential of tax revenue. The fact that Foxconn made a deal with the state for a package of tax incentives merely means the state won't collect theoretical corporate and property taxes from this entity. The state is not paying money out of the treasury to Foxconn. What the state does get from Foxconn is jobs. Three thousand jobs is significant, even in a moderately populous state that's already doing well. The employees pay state income tax (ranging from roughly 4% to 7%), they'll spend their paychecks on food, cars, homes, and consumer goods, and the ripple effects will be quite beneficial. The initial construction will employ lots of people as well--builders, inspectors, security, suppliers, utilities, etc. It's interesting that the Asian countries have long recognized the benefits of plants and factories, whereas in the U.S. people have come to regard these efforts as a bad thing, polluting and greedy and tax evaders. Singapore one time offered HP ten years tax free in return for setting up a laptop factory there; they understood implicitly that technology employment is beneficial to the local economy. I frankly can't understand why people (aside from NIMBY neighbors who don't want the increased traffic and activity) would characterize this excellent development as a net negative.
- kenoshathrow 9y ago> aside from NIMBY neighbors who don't want the increased traffic and activity This made me laugh. Let me try to explain why. Kenosha/Racine are about as far from SF Bay / crowded metropolis as you can get. They're bedroom communities of Chicago and Milwaukee with one or two major local employers. So, trust me, none of the locals care about the traffic/activity. If anything, they welcome it. However, locals do care about the environmental impacts. Tourism, growth of bedroom communities, and other economic activity related to the location's environmental appeal helped the local economy sustain the hit from auto factory closures. A dirty, polluted lake would rob this region of a somewhat unique/defining natural resource. And the locals know all too well that factories come and go. So, far from NIMBYism, there's a very intelligent and hyper-rational, purely economic concern about the economic impact of degrading the local ecosystem.
- InclinedPlane 9y agoThe concept that America is not substantially a crony capitalist economy is at present untenable. There are too many examples otherwise. And if people don't see this development as a primary threat against every principle the US was founded on they are either not paying attention or deluding themselves.
- PeterStuer 9y agoAt the risk of sounding pedantic: how do you prevent a capitalist economy, an inherent cumulative system that in practice can not be separated from the meta-system that regulates it, from turning into cronyism?
- InclinedPlane 9y agoI suspect you're looking for some sort of iron clad algorithmic solution that is good for all cases, that's not how it works. The answer is the same as always: eternal vigilance. An educated and engaged electorate. A functional media. And the ability of the government to course correct as necessary. Institutions that feel they are accountable to the will of the electorate. There are, of course, many examples of this not working, but there are examples of it working as well (trust busting around the turn of the 20th century, the breakup of ma-bell, etc.)
- Feniks 9y agoStill amused that the jobs Trump promised will end up to be Foxconn jobs. Not really the jobs people wanted and certainly not the jobs that will rebuild the nation. And ofcourse those jobs will be automated in 20 years max anyway. The Chinese are not stupid, they're actually moving away from light industry. Decreasing state subsidies.
- propman 9y agoI don't disagree with giving out tax credits, I jut disagree with giving them to unreliable companies like Foxconn without a more firm contract. I also potentially disagree with how big the breaks are. Tesla received a $1.3B incentive from Nevada and a bunch of other perks. At the time, I believed it was a clear net positive for Nevada and I haven't had the chance to look in depth about this deal, but I hope it's the same here. This isn't a Republican or democrat thing by the way. Both sides do this about equally. Just like Amazon bidding for their campus.
- vadimberman 9y agoIn addition to what the others pointed out: * Worker training, $20 million * Utility costs, $140 million Does the state pay for that? * U.S. Interstate 94 North-South project, $408 million * Road improvements, $134 million How is improving the infrastructure a bad thing? FoxConn is a great excuse but they should be doing that anyway, no?
- coldcode 9y agoI assume the 13,000 supposed jobs require skilled workers being found to want to live in Wisconsin in a time of full employment. I also assume Foxconn wants to pay them wages similar to the ones in China. Good luck with that.
- throwawaymanbot 9y agoCapitalism currently... according to the GOP; take corporate welfare... as much as you can give or take from the state and tax payers..then... with a straight face, pretend its Capitalism.