To land the massive Foxconn factory, Gov. Scott Walker has committed the state to paying more than eight times as much per job as Wisconsin will provide under similar job creation deals struck last year, a Milwaukee Journal Sentinel analysis has found.
At more than $200,000 in state taxpayer money per job, the incentive package for the Taiwanese company is easily the state’s most expensive deal of 2017, totaling more than three times as much per job as the next most costly deal.
To get a fair comparison with Foxconn, the newspaper purposefully looked only at the more expensive 2017 deals in which the state offered tax credits for jobs created. That’s because it tends to cost more in tax credits to spur a company to create a new job rather than to retain an existing one.
Even then, the Foxconn Technology Group deal stands out.
Tim Bartik, an independent economist who studies economic development, said Wisconsin is paying many times more per job than he typically sees in other projects nationally and is even shelling out more than some states were willing to pay per job for the much-hyped Amazon headquarters.
“Around the country, you just generally don’t see offers this high,” said Bartik, who works for the W.E. Upjohn Institute for Employment Research in Kalamazoo, Michigan. “It’s very, very high.”
Wisconsin waives nearly all corporate and income taxes on manufacturing profits in the state. On top of that, the state will waive $150 million in sales taxes for Foxconn and pay the company up to $2.85 billion in tax credits—likely in cash—if it creates 13,000 jobs and invests at least $9 billion in a Racine County plant to make liquid crystal displays.
Foxconn also could benefit from lower electric rates, state money for roads and worker training and up to $764 million in local incentives from Racine County and the village of Mount Pleasant. But the Journal Sentinel analysis looked at only the state tax credits.
The newspaper examined Foxconn and the 58 other deals from 2017 in which Wisconsin promised companies tax credits if they created or retained jobs. The analysis found:
- Foxconn’s $2.85 billion in tax credits accounted for 96 percent of the credits that the state awarded in these 2017 deals, but the deal produced only 44 percent of the jobs.
- The other 18 companies with 2017 deals to create jobs—not retain them—are set to receive an average of $26,300 in tax credits per job from the state. The closest deal to Foxconn was with convenience store chain Kwik Trip, which is getting $63,800 per job to expand its La Crosse headquarters.
- Foxconn would earn $219,200 per job if it holds up its end of the deal with Wisconsin. That’s just over eight times as much per job as the average from the 18 other job creation deals and more than three times as much per job as Kwik Trip, the second costliest deal.
- When all the 58 deals—both for newly created and retained jobs—were analyzed, they cost about $7,200 per job, or far less than for Foxconn.
- The Foxconn deal would also result in lower investment levels in plant and equipment compared to most of the other deals. Foxconn would put in up to $3.52 of private investment for every $1 in state tax credits. But the other 58 deals would provide about $14.45 in private investment for every $1 in state tax credits.
Walker and his administration have repeatedly said that the Foxconn deal makes sense because it will create a new cluster of technology companies and transform the state’s economy.
“The state recognized the once-in-a-generation opportunity presented by Foxconn is unlike that of any other project in the state’s history as Foxconn is bringing the future of electronics manufacturing to Wisconsin with the first LCD manufacturing facility outside of Asia,” said Mark Maley, spokesman for the Wisconsin Economic Development Corp.
Bartik, the economist, said it might be possible to justify the Foxconn deal if the company ends up creating a technology cluster in Wisconsin that is akin to the one seen in Silicon Valley. But he cautioned that an impact like that is rare.
Bartik said that incentives nationally typically work out to be about $30,000 per job, or a little more than what Wisconsin offered other companies to create jobs last year.
For comparison, Bartik pointed to the reported offers made by states like Maryland and New Jersey for the second Amazon headquarters. In raw dollars, those offiers are no more than double Wisconsin’s offer to Foxconn even though has Amazon is offering up to four times as many jobs.
“As far as I know, per job no one has offered Amazon anything like what Wisconsin offered Foxconn,” Bartik said.
For his part, Maley noted that at least one other state—Michigan—made Foxconn an offer that seems larger than Wisconsin’s.
“As has been reported, other states offered larger incentives, but Governor Walker and his reforms gave Wisconsin an advantage that resulted in the company’s decision to make this historic investment in our state,” Maley said.
Michigan promised Foxconn what the state described as a $3.8 billion incentive package, but that state was mostly offering to waive taxes.
Wisconsin already waives much of those taxes for all manufacturers and never even put an explicit dollar value on those benefits, preferring instead to make a simpler offer that was heavy on cash.
Senate Minority Leader Jennifer Shilling, D-La Crosse, argues that price is too high, saying in a statement that the Foxconn deal commits the state to “decades of economic costs and liabilities.”
“This is the largest taxpayer handout out to a foreign corporation in U.S. history and will result in fewer state dollars going to local businesses, schools and roads, which are essential for long-term community development,” Shilling said.