Memo: Foxconn cost to Wisconsin nearing $4.5B | Hacker News Reader

Memo: Foxconn cost to Wisconsin nearing $4.5B

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234 pointsaaronbrethorst170 comments

In 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-environmen...

I'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.

Interesting. 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?

Nothing. 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.

I can't wait to vote for the challengers of any one on my ballot that supported this foxconn bs. Also, the WEDC is a fucking joke. Talk about privatizing profits and socializing losses. The Republicans in this state are the biggest hypocrites, picking winners and losers. Free markets my ass. Makes my blood boil (and I tended to vote just right of aisle).

or a gazillion dollar job with a company once he retires from the state job. Maybe not with Foxconn but with a supplier or client of theirs. Wink + nod=

What evidence of corruption does anyone have that could put him away in jail for a long time?

None, or they would have used it, but that doesn't stop people on the Internet from gossiping.

Corruption doesn't necessarily have to be illegal.

Like adultery, for instance, right?

How's that?

> I wish every small business could be paid to create jobs.

They already do! It's called revenue.

>> I wish every small business could be paid to create jobs.

>They already do! It's called revenue.

I give you a job. I pay you $500. You generate $100 of revenue.

I'm pretty sure I just lost $400, you gained less than $400 after taxes, and the IRS gets to enjoy the spread.

Edit: changed to reflect that there are more winners than just the IRS

1. You're a bad employer, if you're losing $400 per employee, and deserve to be run out of business as per capitalistic market efficiency.

2. I just "won" $300.

1. Agreed.

2. Agreed-ish. Assuming 40% tax, which seems high (unless you live in a country that has nationalised health care)

3. Neither of these things relate to being paid to create jobs. You're not wrong, you're just not on thread.

Just for reference, 40% tax is still high for a country with nationalized health care (Canada):

https://simpletax.ca/calculator

At $150k/yr, your marginal tax rate is close to 40%, but your overall tax rate is more like 31%. I'm in Saskatchewan, and every time I've played with different income levels, taking into account the exchange rate, we end up paying very similar amounts of all-in income tax, with ours including (most) health care. (Comparing with California)

Once you consider the typical US co-payments to actually use health care, it's cheaper in Canada. Getting an MRI in California cost me close to $1K out of pocket, despite fancy insurance that paid most of it. In Canada it's pre-paid in taxes.

Also when you consider that we don't have to pay anything for insurance to cover that. The MRI costs $0 out of pocket, covered by the healthcare that is already factored into our equal-cost taxes.

There's still a benefit to having health insurance for covering stuff not covered by the gov't plan: vision, dental, some fraction of prescription drugs, etc. I do have a health plan through work, but I think it costs somewhere around $50-75/month to cover all of that stuff for my family.

Absolutely. If you add decent insurance to income taxes as a basic cost of living, it's cheaper in Canada. I moved to Canada from California and even before becoming a permanent resident I needed to use the health service as a family member was sick. I will be forever grateful for the excellent service and zero cost at point of use even for my family as (tax paying) temporary workers. I'm now raising Canadian kids to do their part to pay back the system that saved their mother's life.

It's pretty wild. At one point, I forgot to renew my health card and had a bit of a fall that tweaked my wrist. I went to the clinic by my house and they warned me that I'd have to pay out-of-pocket for the services, but I could submit the receipt after renewing my health card and get reimbursed.

Doc felt my wrist, asked me to go to the radiology clinic next door for a digital X-Ray, and to come back to discuss what he saw on it. Doctor visit: $30, X-Ray: $30.

When the two options are: use your provincial health card or pay cash, costs can stay relatively low.

1: isn't that the business plan of most vc backed startups

Wisconsin actually has had a "job creator" tax credit since Walker got into office.

> I wish every small business could be paid to create jobs.

I always thought tax credits for businesses were more related to numbers rackets than to actual economic gain.

Here's a thought experiment:

I take one person from my company, fire him, and split the job into two people. Both get paid less than half of the original guy I fired. Yet one of the keeps the old title. Did I create a job? Yes. Did I grow the economy? Doubtful.

While splitting one job into two seems far fetched, it's not that far fetched to split 8 jobs into 10, say.

> Did I create a job? Yes. Did I grow the economy? Doubtful.

Probably depends on the salary range(s) involved and how deep into "mostly discretionary income" the original employee was (and, I guess, how much they spent v stashed that discretionary income).

Actually, you arguably shrank it if the new lower salaries both render the receivers eligible for a greater share of public benefits while subjecting them to lower marginal tax rates.

Yeah that's a good point, but that also means there's more rent being paid, more food being bought. So it's probably at best a wash.

> I always thought tax credits for businesses were more related to numbers rackets than to actual economic gain.

Agreed. And when the businesses receiving these credits are primarily "creating" low-paying service sector positions, the picture is even more bleak.

One of the most sickening things I've ever read.

Living around the great lakes, and knowing what China's like due to lax enforcement of environmental regulations, this kind of stuff terrifies me. Michigan didn't do this kind of kowtowing trying to get Foxconn (to be honest I don't think it would be possible to after the whole Flint water issue), but who knows what kinds of problems will be introduced throughout the watershed when Foxconn exercises any of these allowances.

I wish no business could be paid simply to create jobs. This is just distorting the economy. Arguably, the pressure to spend less on humans where possible drives technological advancement.

>I've never heard of anything like this. Is this common?

With the scope creep of what is a "wetland" (1)(2) is basically an approval to construct a facility. Wetland regulations are so broad that you basically can't build a large building and a parking lot for the people who will work in it without 9000+ hours of back and fourth with the EPA and local agencies.

Last I heard (2017) many man-made drainage ditches would be considered wetlands.

(6) is basically an authorization to run power lines to the facility. (3) and(4) are basically an authorization to pave driveways to connect to existing infrastructure

Basically all but five are the state saying "we're not gonna bait and switch by bogging you down in red tape once you select a location and get the ball rolling"

(5) is the one where they're going out of their way to sweetening the deal and depending on the site selected I really don't see a big issue with it because Foxconn is still subject to federal rules so they're not gonna build a factory somewhere that the risk of environmental impact is large.

My problem here is that Foxconn can get quick and easy approval for a facility but Noname Joe's Lumber Supply has to tailor their plans skirt around the laws if they want to build a facility.

A lot of pollution is stuff where a little bit of it is more or less harmless, but it gets bad when lots of people do it. It can make sense to grant special case exemptions rather than lowering standards as a whole.

For example, it's common for old cars to be exempt from emissions regulations, and small aircraft are still allowed to use leaded gasoline. (Arguably the leaded gas use by small aircraft is still big enough that it should be stopped, but regulators don't seem willing to actually do it.)

Of course, granting it to one company just because they're building a factory you want is naked favoritism, not the sort of at least vaguely sense-based decisions we'd want to have.

is it because Apple needs Foxconn?

No.

So... Foxconn can get tax breaks, and environmental regulation exemptions, good for them, but what about other businesses?

Say I have a business (does not have to be in Wisconsin... say, Texas) doing something similar to Foxconn. So I have to pay taxes - no tax breaks as for Foxconn, and no environmental regulation exemptions.

So now, how can my business compete with Foxconn? They get all the breaks and I get none. Basically, that will shut my business down. Employees will be fired, shareholders will lose their money, etc.

That should be added to the tally when we are looking at the overall impact of such sweetheart (for the Foxconn) deals on the economy.

Let's go one step further.

No states are allowed to favor FC because it might risk an incumbent. FC takes business to Canada. Canadian economy is now slightly stronger than the US, USD drops slightly. Zero US jobs were created.

>> Canadian economy is now slightly stronger than the US

But... is it? That was kind of my point. It is not clear at all.

So in Canada in particular, I remember big issues with the likes of GM and Ford. Here is what happens:

1/ Government attracts GM with tax breaks, will finance infrastructure, provide loans etc, etc.

2/ GM says "great". Builds the plant, employs people. This is the good part.

3/ Once the tax breaks expire, GM declares that the plant is not profitable anymore and shuts it down.

4/ So... was the plant beneficial to Canada? Depends who you ask. Some pundits add the numbers and say that Canada lost money in the deal, some say Canada gained.

What is obvious is that government spent a boatload of money to provide a job to like 3,000 people for three years.

Some argue that it would have been much cheaper to just give that money to random 3,000 people.

I like this next step, but once you cross countries it gets significantly more complex. I doubt Canada would be a drop-in replacement.

Let's say there are no nationwide standards. Texas attracts a California company with no minimum wage, no taxes, very little regulations. In this imaginary situation, Texas "created" jobs. But we are all worse off.

It seems like we cannot leave anything we consider important to the states or local government or we risk a race to the bottom.

Or maybe we should leave everything possible to the states, so that we collectively get the most competitive system versus the world.

I don't think that we should toss out all federal standards, but I do worry about the pretense that we can operate our states as a giant cartel/union who collectively agree to not sharpen their pencils "against" each other, rather than seeking to be genuinely competitive in a world market.

> I do worry about the pretense that we can operate our states as a giant cartel/union who collectively agree to not sharpen their pencils "against" each other

Of course, no sane person will disagree with what you said. This is why we need international diplomacy (carrots and sticks) to force the world to follow suit. I think there are several problems and we can't please everyone. In my example, it is little consolation to tell someone in California that their jobs aren't going overseas. "Don't worry. It is just going to Texas. Nothing to see here. Move along." What good does it do to them? Should they just move to Texas following the jobs? What will happen is standards will lower everywhere.

Here is an outrageous idea (don't actually do this): disband these united states and all states individually join the European Union. We will quickly see how important the federal government has been for each and every one of us in the world stage.

I suspect I'd agree with you over beers more than is apparent on HN text, as we naturally focus on and discuss the differences much more than the agreement.

In your hypothetical, should we tell the person in Texas who doesn't get the new/moved job, "Don't worry; you are going to stay unemployed because someone in California is doing that job, not someone overseas."?

> "Don't worry; you are going to stay unemployed because someone in California is doing that job, not someone overseas."

I think I'd agree with you a lot as well but the problem with "moving" the job from California to Texas is that it is a net loss for us as a nation. No company will choose change if all else are the same. They picked Texas because they can get more for less. So, the Texan worker will get less than what the Californian was getting. I mean look at non-compete clauses. I think if you enforce a non-compete clause it is only fair that you have to pay them a certain amount of money (I think fair amount is market rate but I don't know how to calculate it) for NOT working. This to me is common sense and yet this is not the law in all fifty states.

Worse is when we are talking about negotiated tax "discounts" or regulation "waivers" to companies. These do not hurt anybody directly so nobody feels the pain in the short term. However, we are all worse off because of it.

Define "net loss"

To someone who thinks CA has an insane regulatory environment then TX getting the carrot part of the deal and CA getting the stick part of the deal is a net gain.

So be it. Ensuring CA jobs stay in CA is something the 49 other state governments should give exactly zero shits about. Their responsibility is to their constituents not some other state. If CA doesn't like it that's exactly the kind of thing the federal government exists to mediate.

Just put provisions against state aid in NAFTA.

It works pretty well for the EU. No more race to the bottom in environmental regulation or taxation.

your plan sounds good until you remember that suggesting gov regulation in the US will get you killed as a mutant commie.

*intellectual property mafias exempt.

The usual scam is for your Texas company, if it is large enough, to start a public search for a new place of business, and encourage other cities to submit open bids. As they race to the bottom, your own city and state will feel like they should offer you tax breaks to stay. So you accept those, and you get free money. Or, if your intention as CEO was to move closer to your kids in Denver, then you accept their offer.

It 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).

The 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.

Valid point, but the article doesn't mention anything like that. :)

It doesn't cost the state anything. It costs the tax payers. Parsing words? Not really. Just wanting to use truthful and transparent language.

That'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.

And the abstraction of the state having money is helpful? How so? It's fake. Words matter. Language matters. Ask Orwell.

The point being when the abstraction is removed and the truth repeated, perceptions, opinions, and eventually the decisions and actions of citizens will change. As it is, the abstraction enables complacency.

The government is not your employer. YOU are the government's employer. See? The conventional lexicon has confused you. Which, thank you, supports my original statement.

> And the abstraction of the state having money is helpful? How so? It's fake. Words matter. Language matters. Ask Orwell.

The state is a real, tangible entity that has a separate coexistence from the collective of individuals under its jurisdiction. The US is not a democracy--it is very intentionally not a democracy--it is a republic.

What you are arguing, although you are using language to obfuscate the meaning, is that you personally own anything the state owns. But even if you take the mistaken view that the government is nothing more than the people it governs, that ownership is not personal, but collective.

If I buy a $10k car, and expense it to my employer I would say the car cost my employer $10k. I may have been the one with agency, but the cost is not mine to bear. The idea of representative government, is that we're employing the government to decide how our money is spent.

You hand your employee a credit card. They buy a car with it. They drive the car back to the office, hand you the keys and proclaim, "Look what I bought you."

In your world the reply is, "Golly gee. Thanks. You're so good to me."

In my world the obvious reply is, "Huh? What? Do you think I'm stupid?"

Language is a tool, and it can also be a weapon. Orwell would disagree with one of us. I'm fairly confident it would not be me.

I wasn't implying it was some outlandish misbehaviour. Company cars are a real and common occurance, as are other large business expenses, like plane tickets.

This rhetoric around taxes is tiresome. Once you pay your taxes it's not your money anymore. There's no magic that makes taxes different than collected rent or paying a bill. It's entirely a political framing-- a new one at that.

Oh? Um? Whatever happened to taxation without representation? Whatever happened to of the people, by the people, for the people?

The gov is nothing without you and your revenue. They work for you. They are (supposed to be) your agent/agency.

Long to short, the money belongs to you. The language should reflect that. The fact that it doesn't enabled people to forget the true nature of the relationship. Suggested reading: 1984.

> Whatever happened to taxation without representation? Whatever happened to of the people, by the people, for the people?

Representation in government is not ownership of government.

> Long to short, the money belongs to you.

It literally doesn't. By definition it doesn't. Respect the is-ought distinction.

> Suggested reading: 1984.

Suggestion: drop the certainty in your perspective. Your confidence in a wrong idea based on such shallow reasoning means you can learn a lot more than you already know.

The tax credits are “refundable tax credits” so depending on what their taxes are the state might end up paying Foxconn.

When companies promise x thousands of jobs how do they come up with those numbers and why does anyone believe them? There's no way Foxconn is building a factory that requires 13000 staff. More than likely they're counting jobs created temporarily during construction, and jobs created by surrounding businesses that might crop up.

The credits are tied to these jobs actually being created, so no jobs => no credits => no problem :)

Which jobs, is the parent's point. Also I'd be shocked if there weren't a loophole Jupiter could fit through on it.

Until they threaten to leave, then the whole thing will be renegotiated. That's where the problem comes in.

Or the standard "too big to fail" sunk cost fallacy will save them.

Foxconn has a history of making large claims that they don't live up to (e.g. Pittsburgh and Brazil) [1]. It's hard to trust this deal is handled properly when we find it's actually costing 50% more in tax credits after the fact.

[1] https://www.nytimes.com/2017/09/20/business/foxconn-trump-wi...

Every other company in the state will have a harder time hiring those workers because they aren't receiving a subsidy bolstering their after-tax profits. It's unfair to make all other business essentially transfer money to one that spins a good story to politicians.

This. Not only does giving credits and incentives to huge organizations harm other local organizations because competing on wages is more difficult for them now, it also increases systemic risk and transfers more power to the Goliath. When "everyone" is dependent on the too big to fail organization, that organization can throw around more threats that they will leave if they don't get what they want. Now everyone is beholden to it. These deals are bad all the way around.

Foxconn / Hon Hai had an extensive record of doing exactly this in Taiwan. I would be surprised if they haven't done the same in China.

Are they tied in the same way we gave Billions to ISP to give everyone Broadband?

I do not have any faith that government will actually enforce the requirement, I have seen it many many many where a company promises X number of jobs for Y tax break, then the actual jobs create is FAR FAR FAR less so the government just passed a new ordinance to adjust X to what ever the company did so they still get the credits even though that did not honor the original deal.

I've seen this defined in some infrastructure bill (usually it's not defined). 1 job created really means 1 job for a year. If the job exists next year too, it's apparently created that year too. This doesn't match with my definition of creation, but it seems to better match up with reasonably likely job outcomes of projects advertised as job creation.

Eg: this factory will create 13000 jobs over the next 5 years doesn't mean there will be 13000 more working people in 5 years, it just means 13000 man years of work in the 5 year period.

Not the state tax credits ($200 million per year) as they are refundable and effective state tax for manufacturers is 0.4%.

If the project estimates were off target how can the estimate for new jobs be trusted?

4.5bn / 15 / 13,000 = $23k cost per job created, give or take, plus the chance for a boosting of local manufacturing. That seems perfectly reasonable.

$23k tax collected / job created with a 7.65% state tax rate, roughly means a $300k salary per job for 15 years. Sure sales tax and real estate taxes will help some, so let's be generous and say you only need $200k in average salary for 13k workers over 15 years. That still sounds completely unreasonable to me.

I feel like governments would come out ahead if they refused to negotiate. I guess with multinationals the nash equilibrium leads to governments all ratting out each other... Isn't there something game theory can do to save us here?

The prisoners dilemma ultimately proves that in the short term, while you win more if everyone works together, you ultimately risk losing less if you don't work together.

Or rather, if you think another govt might blink and screw you, blink first and screw them to avoid being screwed more by them.

23k per year of incentives for each job created? With an average household income of 66k/year? https://www.point2homes.com/US/Neighborhood/WI-Demographics....

Shirley you must be joking. (apologies to Abrahams, Zucker and Zucker)

Potentially quite a bit higher depending on how numbers play out. http://www.politifact.com/wisconsin/statements/2017/aug/16/j...

> Shilling said about a $3 billion incentive package being offered by the State of Wisconsin: "Foxconn tax break could exceed $1 million per job."

> We found in a previous fact check that the state would not be paying Foxconn $3 billion for 3,000 jobs -- or $1 million per job -- because the full $3 billion would be paid only if 13,000 jobs are created.

> In Shilling’s favor, if Foxconn invests at least $9 billion in its plant as it has said it will -- but hires only 1,500 workers -- the incentives paid would exceed $1 million per job.

Make sure that one also takes into account https://www.revenue.wi.gov/Pages/faqs/pcs-work.aspx

> Wisconsin currently has reciprocity agreements with four states: Illinois, Indiana, Kentucky, and Michigan. These agreements, provide that residents of these states working in Wisconsin will be taxed on income earned as an employee by their home state, and not by Wisconsin.

Take into account also the relative unemployment rates of the area - https://www.bls.gov/lau/maps/aamarate.gif

I can't tell if you're being ironic or not here.

Note that the tax credits and exemptions will mostly take the form of direct cash transfers to Foxconn because the credits will be due whether or not Foxconn owes taxes, and Wisconsin exempts manufacturers from almost all corporate and income taxes.

Can you explain this a bit more? Neither exemptions nor credits imply any kind of cash payment to the company.

See "Refundable Tax Credits" as mentioned in https://www.wpr.org/wisconsin-foxconn-deal-waives-environmen... (upthread)

The Foxconn plant will only start with 3,000 jobs with the 'maximum potential' of 13,000 jobs.

Note the qualifiers 'could' and 'maximum potential' before any quote of 13,000 jobs in any news article. It is in Foxconn's best interest to inflate the 'max potential' number as high as it can. 3,000 instead of 13,000 jobs makes a lot less sense for the state.

http://money.cnn.com/2017/07/27/technology/business/foxconn-...

Yes. No way in hell there will be 13,000 jobs, or even 3000 for LCD manufacturing line. There are $B manufacturing facilities that employe less than 50 people. My guess it will be about 300 people in the end.

A key consideration there with the hypothetical job creation is that this facility is on the border of Wisconsin and Illinois. There is more unemployment in the Illinois side of the border on the Wisconsin side suggesting that the ratio will be similarly skewed.

Lake County, IL has 4.6% unemployment; Kenosha county, WI is at 3.7%. McHenery county, IL is at 4.0%, Walworth county, WI is at 2.8%.

Most states collect income tax for all income generated in that state. For example, if you work in Minnesota and live in North Dakota, you pay income tax to Minnesota. There is an agreement between Wisconsin and Illinois that people working in state A and living in state B pay income tax to state B rather than A.

So, for the jobs created, over half of those will be from Illinois residents who pay their income tax to Illinois instead.

> When you add back the revenue that would be generated from 13,000 jobs the state will come out well ahead.

You haven't proved that statement. I calculate that the state will likely recoup it's taxes from personal income only if Foxconn hires 13,000 people for 20 years.

Edit: Showing math

20 years * 13,000 people * $70,000 average salary * 17% income tax is around $3 billion.

Note, as mentioned by others, that's probably 3k to 13k "job years", so more like 6M to 150M usd.

Not a very good deal. And 70k avg salary seems high?

The deal is for workers making $30k/y and an overall average after some time of $53k/y (including white collar jobs).

Good point. That becomes around 40 years then to repay the cost.

So its in the thread... https://www.jsonline.com/story/news/politics/2017/11/24/got-... is the reference for many of the points of numbers.

> To receive the state payments, Foxconn would essentially have to hire a sharply escalating number of workers, starting with at least 260 next year and rising to at least 5,200 in 2022 and at least 10,400 by 2027.

> Foxconn would have to pay a worker at least $30,000 a year to earn the incentives on that hire, with a required average salary for all workers of $53,900 annually. If Foxconn lies to the state, closes the plant or falls below certain jobs minimums, the company could have to repay some of the incentives.

$70k was a "best" case scenario to do the calculation.

What portion of those are Wisconsin state residents?

The deal starts out at about 500 workers and ramps up over the period.

The deal specified workers making $30k/y and an average includes white collar jobs at $53k/y.

Income tax on $30k is 6.27% for earnings between $29k and $326k.

Just the state tax credits alone amount for ~$219k per "job".

How much money does a Foxconn worker need to make for how long to make up $219k in tax payments?

Seems pretty damn silly to me to pay a company to come here from China, pay them to hire locals, pay them to pollute and destroy.

Only way this makes sense is if politicians/land owners are going to be making a pile of money at the expense of Wisconsin's environment and people.

>Only way this makes sense is if politicians/land owners are going to be making a pile of money at the expense of Wisconsin's environment and people.

Look at who the governor is and then tell me how likely this is.

> * 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.

The incentives cost the state & local $288692 per job-year (which is what "13000 jobs" is actually defined as according to cptskippy and toast0). And that's assuming Foxconn actually reaches 13000 job-years, which they have no reason to do if the incentives are front-loaded.

cowkingdeluxe's alternate take is that the factory will start out at 3000 jobs[0] and may eventually grow to 13000, assuming it stays at 3000 jobs that's $1250000 for each job, are these jobs really going to generate $1.5 million in revenue each so that the state will come out "well-ahead"?

[0] could actually be jobs-year as well making the entire thing even worse.

I 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.

I 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.

>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.

States have latitude on how they tax. I'm thinking it would be a debate as to how much latitude and who could restrict them.

Tax 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.

There'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?)

Your 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 :(

See the prisoner's dilemma. In the short term, the most likely way to win is to ensure everyone loses.

Probably not that many jobs because it’s going to be heavily automated.

> Tax credits are not costs. If Foxconn didn't come to Wisconsin none of that money wouldn't be realized.

That's a "pushing the dirt around" argument. Someone else has to pay for the state controlled resources used by Foxconn when the facility is built.

Is it the government's job to create happiness? What else does a govt do with that explicit and sole goal? I guess you could argue any funding of the arts is aimed at creating happiness but it would be hard to imagine a Department of Fun building theme parks and hosting concerts.

Getting 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.

Jobs are not an upside?

Nearly 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".

Jobs jobs jobs

Spoken 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?

It's presented as "This is a non-zero net job thing!" without questioning it. This is a problem. Are the taxpayers squandering say $20 million for creating a minimum wage part-time, 2 week gig? Well let's not limit the opportunity here! Let's waste those 20 million dollars! We're just losing 99.9985% of our principle. What a great investment!

A bad policy fundamentally limits the number of jobs in the long run because by then you've already spent the money poorly, in a way that didn't lead to many jobs at all.

If you could "create X jobs" one way and that would lead to "X*3" jobs later on, wouldn't you want that instead of something that creates "X/4 jobs" in a temporary environment and leads to "create 0 jobs" later on?

If that's the only thing you care about; not the environment, type of job, structure of the work, sustainability of the practice, actual pay, health, culture, well-being of society, if it's only the total quantity of jobs, then it's still a wasteful squandering of resources because you can get "more created jobs" for less money many other ways.

We have to do better than just saying "ok" to every bad deal that comes along.

The 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.

At 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?

I 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.)

Predictably, $3 billion is simply a negotiated discount on fees in return for Foxconn choosing Wisconsin over a state not willing to discount fees.

I 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.

Would make more sense to just hand the money to the people that would get those 'jobs' and be done with it?

Or 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.

Or create jobs with it to clean up the environment or service people that need help.

Seriously. 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.

$4.5B + the long term liability of maintaining all the new infrastructure

Wisconsin is already far behind on the infrastructure maintenance front.

I 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.

I 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.

In 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?

So, 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.

Because somebody else will give them the tax break before they have been around. It's a race to the bottom.

The best time to negotiate is before you start.

I thought it was after you got them to sign the contract?

Still 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.

And Steve Jobs told Barack Obama those jobs weren't coming back!

13,000 jobs is essentially indistinguishable from zero if you're looking at a national scale.

Note 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.

I hope it's better than giving $100,000 in credits to 30,000 small businesses in the greater Milwaukee area.

This is an attempt to set a precedent of successful investment on American manufacturing.

Is this idea in particular viable? Probably not.

This 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.

Many countries give short-term incentives to attract long-term foreign investment.

Some countries go as far as providing guarantees for investors in their constitution.

Developing 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-elec...

All investments have associated risks. e.g: Microsoft invested in Nokia and turned out bad, except for the acquisition of a substantial IP portfolio.

The reason why Foxconn is building a plant in the US is to hopefully exempt the company from a US-China trade war that Trump might possibly be stupid enough to start. Wisconsin was the lowest bidder.

Will 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...

I 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?

At 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?

Any kind of response I would give here would just be regurgitation of junk articles I've read, sorry.

Kansas 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.

> I voted for job creation through lower taxes

That’s precisely what this is - just a little more targeted than you were probably expecting...

That's the big difference here. Is the Wisconsin legislature qualified to say that the semiconductor industry is going to be stable for the next decade? The outcome of this plan is dependent on the continued growth of this targeted industry-- continued growth that the Wisconsin legislature has no way to predict and no place predicting.

As a model of government, this type of activity is unsustainable. They might not be wrong to bet on Foxconn, but they'll make bets in the future that won't pay off. Let the invisible hand work.

> I voted for job creation through lower taxes

Did you vote this because the evidence shows the world works like that or because you want the world to work like that ?

Exactly. I CTRL-F'ed for Chicago in this comment thread to comment on this. I live in Chicago and I was very happy about this news.

They're building it extremely close to the WI/IL border so I wonder how many people working there will actually be from IL. There's an agreement between IL/WI so that the employee taxes in the paycheck will go to IL and not WI.

On the bright side, it's pocket change compared to the F-35.

Https://politico.com/story/2014/02/f-35-fighter-plane-costs-103579

The 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.

> 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.

The assumption is that a Foxconn plant will destroy the local ecosystem. Any evidence, or just plain anti-business nimby-ism at work here?

This 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..."

And it should be published on blockchain of course.

Any 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.

Free 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.

That 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.

In my country (and presumably yours) there are large companies using any measures they can find to dodge/shift tax obligations. When that information is made public, people gripe a bit but it all carries on. What would the list do in your scenario?

What exactly are we to do with that list? Shall we descend on their house with torches and pitchforks to force them to pay up?

Do you have any evidence that such a government has the slightest chance of working?

Well, it depends on what your goals are. What I've outlined certainly won't support a welfare state, military adventures overseas, drug wars, etc.

But it would be successful in ensuring that people aren't living in anarchy. It doesn't cost that much to keep police, courts, legislatures, etc. going. 19th-century America did this much without an income tax.

One of the useful things science fiction taught me was to look for where the magic comes in to a fictional world. E.g., travel at sub-light speeds makes it inconvenient to write about interstellar empires, so the author creates a magic FTL drive covered over with science doubletalk.

The magic in your fantasy is infinite cognitive capacity. As if each person could carefully look at the list of hundreds of millions of taxpayers across federal, state, county, and city jurisdictions, extract all the information they needed, fairly contextualize it in the total economic and social environment, and then respond appropriately when they meet somebody new over dinner. All the while managing to live their lives, do their work, raise their kids, etc, etc. And that's not even counting the labor of figuring out the correct amount to pay for each function of government, which on its own is an impossible task for a single individual.

In practice, with human cognitive limitations, what we'd have is chaos, parasitic behavior, and a race to the bottom. Which is why we have a system where the free rider problem is instead solved by having a variety of locales one can move to so that individuals can choose the sort of public investment approach they'd like to live under. If you would like to live in 19th-century conditions, you can buy a chunk of land in the middle of nowhere for approximately nothing.

19th-century conditions wouldn't exist in my scenario. None of the knowledge gained over the last century would be lost. And therefore living standards would be high, and grow higher.

I am still thinking about your comment regarding cognitive capacity. I believe that this is something the media could solve, just by normal reporting.

I want to emphasize that success here isn't measured by the number of "free riders" that exist. I think that success is simply that enough people contribute enough funds to prevent anarchy and do little else. And if you're the CEO of a sizable company, it's not hard to see how anarchy would ruin everything...

"The magic in your fantasy" is a very good check for evaluating the mechanism effects of a new product or service. Thanks for this!

You're describing a plutocracy. People with large sums wealth decide the fates of everyone else.

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