Hacker News Reader

Comment by nathantotten | Hacker News Reader

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).

View on HN

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 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.

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.

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.

> * 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.

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

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.

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

> 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.

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

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.

Reply on news.ycombinator.com