Will Wisconsin Get Foxconned? Billions in Tax Breaks for Promises of More Middle-Class Jobs
(This report first appeared in The Progressive Magazine.)
President Trump, Wisconsin Governor Scott Walker, and House Speaker Paul Ryan got a big political boost from the news that the Foxconn corporation is promising to bring thousands of jobs to Wisconsin in a new factory for flat-panel display screens.
But caution is in order, as the Taiwan-based electronics giant is one of the world’s most brutal employers, notorious for driving workers to suicide.
Wisconsin is now poised to reward Foxconn with a whopping $3 billion “incentive” package—the fourth largest “mega-deal” in U.S. history. (That figure works out to an incredible $231,000 per job, and does not include the local subsidies that are invariably a part of such deals.) The bulk of this subsidy would be paid out in cash.
And Trump, Walker, Ryan, and others are planning to stick Wisconsin taxpayers with a fifteen-year mortgage that will mean applying the chainsaw to already-slashed K-12 and university spending, among other vital social needs.
Wisconsin is jumping into the self-defeating interstate competition for jobs, in which U.S. states spend a collective $110 billion on tax breaks and other sweeteners reserved mostly for the largest and most profitable companies like Foxconn, which raked in $2.26 billion in profits last year.
“There’s wide agreement among economic-development specialists that incentives like these for Foxconn are a waste of money for state and local governments,” argues economist Marc Levine of the University of Wisconsin-Milwaukee.
Nonetheless, “It’s super-big!” boasted Governor Walker at a lavish July 27 celebration of the Foxconn deal held at Milwaukee’s stylish Art Museum. Walker pronounced that, henceforth, the state would become a big-time high technology region known as “Wisconn Valley.”
The new Foxconn factory, designed to make liquid-crystal display screens, is supposed to provide jobs averaging $53,875 a year. If true, this would be welcome news in Speaker Ryan’s southeastern Wisconsin district, which has been plagued by the offshoring of thousands of manufacturing jobs thanks to Ryan’s championing of “free trade.”
But claims of average wages are often misleading because they include much higher executive salaries, Kasia Tarczynska a researcher with the watchdog group Good Jobs First, told The Progressive.
Further, promises of family-sustaining wages are often forgotten by major corporations once the public funding is in hand. Already, there has been a powerful hint that the state’s intent to enforce wage standards is less solid than Walker claims. One Republican legislative leader blurted out that most entry-level jobs will pay about $13 to $15 per hour, but thinks most jobs “will be more than that.”
And then there’s the question of whether Foxconn can be counted on to hold up its end of the deal. Writing for Bloomberg, Tim Culpan notes that just this year the company has made total commitments of $27.5 billion including to India and China, as well as Wisconsin. “It's too early to know if those sums will ever be spent.” he writes. “That’s more than Hon Hai [Foxconn’s parent company] has spent in the last 23 years.”
In all, Foxconn promises to invest $10 billion in Wisconsin in exchange for $3 billion is state tax incentives. The legislature will be holding a special session to approve the deal. Walker has already dismissed those raising questions saying, “They’re just upset because they think this is a major victory for me.” Backed up by a heavily gerrymandered 64-35 majority in the state Assembly, Walker is smugly confident about victory for this budget-busting deal.
Yet legislators would be wise to fully scrutinize the agreement in terms of jobs, wages, and the state’s capacity to provide services as it shells out $3 billion to Foxconn. Wisconsin legislators carry a heavy responsibility not only for Wisconsin citizens, but also taxpayers across the nation victimized heavily by the destructive incentive-based interstate competition for jobs.
“This a splashy deal, a trophy for politicians,” Carl Davis, research director of the Institute for Tax and Economic Policy, told The Progressive. “It gets plenty of attention, but the actual impact is another question. This deal comes with a very high price tag.”