Wisconsin's Overhyped Foxconn Deal Keeps Getting Lamer By The Week

from the pray-I-don't-alter-the-deal-further dept

Last year, you probably recall that former Wisconsin Governor Scott Walker signed a "revolutionary" deal: the state promised Taiwan-based Foxconn a $3 billion state subsidy if the company invested $10 billion in a Wisconsin plant that would create 13,000 jobs. Walker hoped the deal would finally help cement job growth that he had been promising supporters for years, and the press was quick to hype the plan without really focusing too much on the math, or Foxconn's history of not really living up to similar promises in countries like Vietnam, India, and Brazil.

Quietly buried under the blistering hype (greatly fueled by the Trump administration), groups like Wisconsin’s non-partisan Legislative Fiscal Bureau began to point out that it would take until 2043 for taxpayers to recoup the subsidy. And as the finer details of the plan began to emerge late last year, the $3 billion subsidy quickly ballooned to $4.1 billion, leading some to point out that the math no longer made sense at all and, with an unemployment rate of 3.2% and a $100,000 per job subsidy, it was technically impossible for the massive subsidy to ever be repaid (in jobs, walnuts, or anything else).

Worse, as the project moved along and subsidies ballooned, the scale of the project began to shrink. An excellent report at The Verge last October noted how the original plan for a 20 million square foot factory that would build 10-foot by 11-foot panels for 75-inch TV screens, slowly shrunk to a Generation 6 plant that only produces 5-foot by 6-foot glass panels, and with original plans for $10 billion worth of investment (Foxconn's original promise) also shrinking to a $2.5 billion investment. Walkers response to the dubious deal was, it should be noted, that critics should "suck lemons":

"There’s a whole lot of people out there scrambling to try and come up with a reason not to like this,” he said in July of last year. “They can go suck lemons. The rest of us are going to cheer and figure out how we are going to get this thing going forward.” Several weeks later, he called the deal a “once-in-a-lifetime opportunity” that will be “transformational” for the state. “These LCD displays will be made in America for the very first time, right here in the state of Wisconsin."

About that. This week, a Reuters report revealed that the original plan for a massive factory bringing 13,000 jobs to the region had changed yet again. Now, Foxconn executives claim, there will be no factory or manufacturing jobs at all. While Wisconsin might get an engineering office, even that doesn't sound all that certain according to Foxconn executives:

"Now, those plans may be scaled back or even shelved, Louis Woo, special assistant to Foxconn Chief Executive Terry Gou, told Reuters. He said the company was still evaluating options for Wisconsin, but cited the steep cost of making advanced TV screens in the United States, where labor expenses are comparatively high.

“In terms of TV, we have no place in the U.S.,” he said in an interview. “We can’t compete."

Rather than a focus on LCD manufacturing, Foxconn wants to create a "technology hub" in Wisconsin that would largely consist of research facilities along with packaging and assembly operations, Woo said. It would also produce specialized tech products for industrial, healthcare, and professional applications, he added.

“In Wisconsin we’re not building a factory. You can’t use a factory to view our Wisconsin investment,” Woo said.

And instead of the 5,200 new jobs that were supposed to arrive before the end of 2020, the Reuters report is now saying those numbers will be closer to 1,000. Maybe? Who knows. Given its expertise in this subject, it's hard to believe Foxconn didn't realize all of this from the start, since the market hasn't magically shifted in just a year or two. Also keep in mind that while the project shrinks, taxpayer money has already been spent preparing for the factory's construction, including the demolition of some homes previously on the target site.

Given the incredible shrinking nature of this project it's also unclear (especially if you've listened to the excellent Reply All podcast on this subject) why anybody would believe anything being said now about this ever-devolving boondoggle.

Filed Under: factories, lcds, scott walker, subsidies, suckers, wisconsin
Companies: foxconn


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  • icon
    That One Guy (profile), 31 Jan 2019 @ 4:52am

    No biggie

    Given I'm sure there was a qualification in the deal that if Foxconn didn't hold up their end of the deal then the state wouldn't have to either, I'm sure the deal has already been nullified and will soon be renegotiated for the vastly scaled back plans the company may have for business in the state.

    I mean, promising a multi-billion dollar tax cut with no strings or conditions attached? That would be monumentally stupid and/or corrupt, and I'm sure an experienced politician such as Walker would never do something like that.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 31 Jan 2019 @ 6:42am

      Re: No biggie

      I thought it was a credit rather than a write off, do they still get the taxpayer's money even tho they broke their end of the deal?

      reply to this | link to this | view in chronology ]

  • icon
    tom (profile), 31 Jan 2019 @ 7:18am

    Some news reports on this say Foxcon is still planning on the 13,000 or so employees, they just won't be manufacturing. Instead the plans are from some kind of tech/research/something white collar job facility. Of course, no manufacturing setup means any expected parts supplier jobs won't happen.

    Yet another cautionary about the silliness of governments subsidizing corporations to build stuff.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 31 Jan 2019 @ 7:21am

    I'm always against these tax breaks, subsidies B.S. deals. Doesn't matter if it's for some corporation like Foxconn, or a Stadium. I'm all about FAIR, which is why I'm for the FAIR TAX. Everything pays the SAME percentage of the money they make in taxes. 10% of $50,000 is a whole lot less than 10% of 1 million. So the rich are still paying far more in taxes. Remove all the loopholes.

    Same goes for businesses. Why should someone new get some special deal no one else there gets? Maybe lower taxes for everyone and that is enough to bring more businesses in.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 31 Jan 2019 @ 7:45am

      Re:

      "pays the SAME percentage of the money they make in taxes"

      How is this "fair"?

      Considering that many are not paid a living wage, the government has to step in and make up the difference just so that these lazy irresponsible businesses can have employees to make cheap stuff for you to purchase. They already barely live paycheck to paycheck and you want to increase their tax burden? How exactly will this help the economy ... which is not very healthy at the moment regardless of what the cheerleaders are screaming.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 31 Jan 2019 @ 9:53am

        Re: Re:

        Rich would rather move capital to places where labor is cheap. In order to get them to move capital to places without slave labor, tax incentives are used. Because the rich get these tax incentives, the middle and lower classes have to carry more weight, essentially having to pay for their own jobs. If they refuse to do so, the jobs go to third world slave labor.

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 31 Jan 2019 @ 11:11am

          Re: Re: Re:

          Short sighted at best, sustainable business models are giving way to get rich quick schemes and blatant rip-offs.

          reply to this | link to this | view in chronology ]

    • icon
      Stephen T. Stone (profile), 31 Jan 2019 @ 7:59am

      Re:

      I'm all about FAIR, which is why I'm for the FAIR TAX. Everything pays the SAME percentage of the money they make in taxes. 10% of $50,000 is a whole lot less than 10% of 1 million.

      The idea of a progressive tax code — one where tax rates go up as income rises — implies that as people get richer, they can better afford contributing to the public treasury, while people who are poor cannot afford as great a percentage because they need that money in a more acute way. This idea is based upon reality.

      The idea of a flat tax, however, hinges on the fantasy that a millionaire and a minimum wage earner can both afford to give the same percentage of their salary to the public treasury. The appeal of the flat tax runs a millimeter deep — “The percentage is the same, therefore fairness exists!” — and close examination will reveal just how much it would hurt the poor.

      {See also: The law of diminishing utility}

      reply to this | link to this | view in chronology ]

      • icon
        PaulT (profile), 31 Jan 2019 @ 8:10am

        Re: Re:

        "The appeal of the flat tax runs a millimeter deep"

        Is sounds nice, until you think about it and try applying it to the real world. On the contrary, the progressive tax sounds bad to people who don't understand it, because they assume the higher tax brackets apply to the entire income and not just the income in that bracket.

        reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 1 Feb 2019 @ 9:49am

        Re: Re:

        The idea of a flat tax, however, hinges on the fantasy that a millionaire and a minimum wage earner can both afford to give the same percentage of their salary to the public treasury.

        If you look up FairTax you'll see that there's a rebate meant to address that.

        Whether any tax is "fair" is, of course, an opinion and not a fact. "Fairness" is a useless term for setting public policy.

        reply to this | link to this | view in chronology ]

    • icon
      PaulT (profile), 31 Jan 2019 @ 8:06am

      Re:

      " I'm all about FAIR, which is why I'm for the FAIR TAX."

      If you actually read about it and think about it, the "fair" tax is a regressive one that disproportionately hits poor people. The actual fair tax is the progressive tax system.

      By all means close up the loopholes, but the "fair" tax proposal is anything but.

      reply to this | link to this | view in chronology ]

      • icon
        Bamboo Harvester (profile), 31 Jan 2019 @ 9:07am

        Re: Re:

        Look at the other side of a "progressive" tax - it's a penalty for success.

        The higher your income, the fewer government services you use, yet the more you pay into their coffers.

        I guess it all depends on your definition of "fair".

        In a pure mathematical scenario, "fair" would be a flat amount per person. In a statistical scenario, it would be a set percentage applied equally to each person.

        In pure reality, every time you try to "soak the rich", they pay it - while having new laws, deductions, and loopholes passed to get it back. So the (rapidly dwindling due to this) middle class ends up paying it.

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 31 Jan 2019 @ 9:25am

          Re: Re: Re:

          Keep the progressive tax rates but eliminate most write-offs and other deductions. Keep deductions for things like education but eliminate those for losses and put a low cap on the rest such as charitable donations. Any deduction that an average income household cannot take advantage of should be eliminated as unfair (and I say this as one who can take advantage of those deductions).

          Offshore accounts and corporate entities should be taxed at the same rate so long as they're ultimately owned by someone living or working in the US. Close the loopholes that allow the ultra-wealthy to avoid paying any tax at all.

          Do this and the tax rates can be reduced since everyone, particularly those with the means to avoid paying tax, would be paying into the public coffers. When 80% of the wealth/income is paying zero or very little tax the other 20% have to make up the difference.

          reply to this | link to this | view in chronology ]

        • icon
          Stephen T. Stone (profile), 31 Jan 2019 @ 9:27am

          Re: Re: Re:

          The higher your income, the fewer government services you use

          The rich use fewer “government services” because the workers being exploited to generate all that income for the rich use those “government services” themselves — and that is because the rich use a different set of “government services” (e.g., corporate tax breaks) to keep most of their income while paying their workers less than they need just to survive.

          In a pure mathematical scenario, "fair" would be a flat amount per person. In a statistical scenario, it would be a set percentage applied equally to each person.

          And in both scenarios, you do not take context into account. Like I said above, the appeal of the flat tax runs a millimeter deep and close examination will reveal just how much it would hurt the poor. So I will do that examination right here and now.

          Assume, for the purpose of this discussion, your “fair” tax is set at 10% of a person’s annual income. For a person who makes $50,000 per year, they pay $5,000 in taxes; for a person who makes $500k, $50k; and for a person who makes $5mil, $500k. But what these amounts fail to take into account is the context of the modern cost of living.

          That $50k worker isn’t putting the remaining $45k into the bank — they’re using it to pay bills like rent, car insurance, groceries, and generalized day-to-day expenses. They will miss having that $5,000 if they one day need to pay an important bill (e.g., an emergency medical expense). One missed bill could mean financial ruin for them.

          The amount those wealthier workers pay in taxes is still the same percentage of their income (10%), but because they make more money overall, they can better afford to take that hit. Their higher incomes give them more of a buffer between “living well” and “living in day-to-day desperation”. Someone who makes $5mil a year, for example, will not be nearly as bad off being taxed 10% of their income because they’ll still have four-and-a-half million dollars to work with.

          A flat tax scenario seems fair only if you remove the context of our modern cost of living. The wealthy — and the “temporarily embarassed millionaires” who stan for them despite the idea of progressive tax rates for the wealthy being in their better interests — love to present that scenario without the appropriate context and hope nobody thinks about it too hard. Because if people really did think about it, they would probably come to the same conclusion I did: The flat tax idea is a load of bullshit.

          reply to this | link to this | view in chronology ]

          • icon
            ShadowNinja (profile), 31 Jan 2019 @ 9:53am

            Re: Re: Re: Re:

            Another problem many have with a 'progressive' tax system is the belief that once you hit magic thresholds like $50,000 for example, you end up paying MORE in taxes then if you had earned 1 dollar less at $49,999.

            This is flat out FALSE.

            The way it works is once you hit $50,000 the rest of the dollars you earned are taxed at the $50,000+ tax rate. The first $50,000 you made are taxed under a different tax bracket. The term Effective Tax Rate refers to the average tax you pay when you average out the taxes you paid in each of these brackets together. So for example if your first $25,000 was taxed at a 10% rate, and your second $25,000 was taxed at a 20% rate, you paid a 15% effective tax rate.

            reply to this | link to this | view in chronology ]

            • icon
              Bamboo Harvester (profile), 31 Jan 2019 @ 10:14am

              Re: Re: Re: Re: Re:

              I use an accountant for my taxes. The laws change yearly, and I don't want to end up either in a cell or owing ten years income to the IRS.

              That said, back under Mr Peanut, the 50 v 49.9 WAS true. There were income tables in the tax paperwork that gave total taxable income = tax due. I worked in electronics back then, and went into a higher bracket by less than ten dollars.

              That said the entire concept of a "fair" tax is nonsense. Taxation is legalized extortion - pay or go to jail. There's no way to make that "fair", except to apply it "equally" to everyone. And then you have to define "equal".

              The ONLY reason income taxes passed into law without politicians hanging from every lamppost was the "promise" that it would only apply to the richest 1% or so, and would NEVER be laid upon the common working man.

              So, looking at that realistically, it passed out of jealousy and envy. And a short time later, came 'round to bite everyone who voted for it in the gluteus.

              reply to this | link to this | view in chronology ]

              • identicon
                Anonymous Coward, 1 Feb 2019 @ 7:23am

                Re: Re: Re: Re: Re: Re:

                "Taxation is legalized extortion"

                Perhaps you would rather not have roads, sewers, water, electric power - or - maybe you prefer to obtain such services from private corporations as that would be much more efficient? This is laughable at best.

                reply to this | link to this | view in chronology ]

            • icon
              PaulT (profile), 31 Jan 2019 @ 10:41pm

              Re: Re: Re: Re: Re:

              "The way it works is once you hit $50,000 the rest of the dollars you earned are taxed at the $50,000+ tax rate"

              Exactly. *Everybody* gets charged one rate for their first $50k, then *everybody* gets charged the same for their next $50k, and so on.

              The fact that most people never make it to the second $50k brackets does not make that tax bracket unfair to those who do. Whereas, taxing everybody the same on their entire income regardless of whether they need it to eat or just to buy their third mansion is inherently unfair.

              reply to this | link to this | view in chronology ]

            • identicon
              Anonymous Coward, 1 Feb 2019 @ 9:58am

              Re: Re: Re: Re: Re:

              Another problem many have with a 'progressive' tax system is the belief that once you hit magic thresholds like $50,000 for example, you end up paying MORE in taxes then if you had earned 1 dollar less at $49,999.

              This is flat out FALSE.

              No, it's rare but it does happen. There are small ranges of income in Canadian provinces for example where the marginal tax rate is above 100%, due to interactions with poorly-thought-out "health premiums" or other ad-hoc taxes. You're basically always better off to have your salary raised by $1000/yr, but a $100/yr raise could cost you money (or cause you to adjust your deductions to work around it).

              A better known example would be the "welfare trap", although that's not purely tax-based (the problem is the interaction between the tax and benefit systems).

              reply to this | link to this | view in chronology ]

          • identicon
            Anonymous Coward, 31 Jan 2019 @ 10:20am

            Re: Re: Re: Re:

            A flat tax can work if there is still a Standard Deduction and it is set to leave a large part of a low income earner's income untaxed.

            reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 31 Jan 2019 @ 11:20am

          Re: Re: Re:

          "Look at the other side of a "progressive" tax - it's a penalty for success."

          Depends upon your definition of success. Some people measure it in pure $$$ amounts, while others measure it in the success of their business - some of whom actually include their employees in such determinations ... you know - like how well their employees are doing and whether they can actually afford the basics of living in that area and therefore do not need additional assistance in the form of welfare, food stamps, subsidized housing, etc ... because as we all know that is not the most efficient economy.

          Give the middle class a few extra bucks and they will spend it - right back into the economy whereas give a few extra bucks to rich and they will put it in savings which does little for the economy. Give the middle and lower, full time employees a living wage and the government subsidies will be significantly reduced thus reducing the overall tax burden - for everyone. But such talk is not welcomed by those who live off others skimming and scamming is their thing.

          reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 31 Jan 2019 @ 12:30pm

          Re: Re: Re:

          The higher your income, the fewer government services you use, yet the more you pay into their coffers.

          How so?

          Anyone who owns a business is going to get more value out of roads (to move people to and from their jobs, to move product, to visit various branches, etc.) than someone who only uses them for their own commute or for leisure.

          Someone who has the money to fly on an airplane is going to get more use out of the FAA, air traffic controllers, etc.

          Someone who has more assets to protect is going to value the protection of the police higher than a homeless person, living on the street.

          I could go on with examples, but the most damning of all is: if rich people weren't getting value from the government, they wouldn't be giving so much money to politicians.

          reply to this | link to this | view in chronology ]

    • icon
      ShadowNinja (profile), 31 Jan 2019 @ 9:45am

      Re:

      A revenue neutral flat tax (as in no adjustment to how many dollars the government collects in taxes overall) would RAISE taxes on like 80% of the tax payers, while heavily benefiting the wealthy. I'm not just pulling this out of my ass, experts have done the math on this repeatedly over the years whenever politicians (often presidential candidates) advocate for this idea.

      So yeah, not going to happen, ever.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 31 Jan 2019 @ 8:40am

    So, out of curiosity, exactly how much did Governor Scott Walker get for encouraging this ridiculous (Fox)con(n), wasting billions in State money?

    reply to this | link to this | view in chronology ]

  • icon
    That Anonymous Coward (profile), 31 Jan 2019 @ 9:43am

    How shocking, I am just shocked! A corporation demanding a handout, promising the moon, then delivering a moldy piece of string cheese... this has NEVER happened before!!

    Pay a few billion to give us a sportsball stadium!! Oh and we get to keep the rights to sell the name for more cash.

    Pay a few billion to create a fund to make sure everyone is connected!! What do you mean we took several billion & haven't delivered?! It is expensive to bother wiring those places up.

    In the FSM we trust, everyone else signs a contract with provisions spelling out how much they will pay in penalties when they screw you.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 31 Jan 2019 @ 9:58am

    ocean front property?

    I bet they (foxconn) offered the legislators some ocean front property in Wisconsin as part of the bargain also.

    Foxconn even sounds like a shady company, like a fox slinking around the chicken coop trying to con the chickens into giving up their eggs... I guess we know who the chickens are in this scenario at least

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 31 Jan 2019 @ 10:22am

      Re: ocean front property?

      What is the point of your post? Just dropping in to sling some crap? Next time try posting actual substance.

      reply to this | link to this | view in chronology ]

  • icon
    Coyne Tibbets (profile), 31 Jan 2019 @ 12:43pm

    Now what are the odds of that?

    With a little luck, maybe the taxpayers can wind up shelling out $4.1 billion dollars for just one job: Walker's new post-governorship consulting job. What's the economic return on that?

    reply to this | link to this | view in chronology ]


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