The High Cost of Foxconn
Each job created could cost the state anywhere from $17,273 to $54,159 per year.
The cost of the proposed new tax credits for the tentative deal with Foxconn could be far larger per job created than some people have suggested. Those costs will vary greatly depending on the ratio of spending for payroll versus the capital expenditures.
The more that Foxconn invests in its facilities and state-of-the-art automation, rather than payroll, the more the proposed deal will cost state taxpayers per job created. A new Wisconsin Budget Project report examines the potential tax credit costs based on four scenarios that make different assumptions about the number of new jobs, the duration of the project, and the amount of Foxconn spending for capital improvements.
In brief, we found that:
- The cost to the state of the new tax credits (excluding other subsidies) could range from about $219,000 per job for 13,000 Foxconn jobs to $587,000 each if the new enterprise employs 3,000 people.
- On an annual basis, the proposed credits would cost state taxpayers $17,273 per job per year for 15 years under the scenario of 13,000 Foxconn jobs described by state officials, but the cost could exceed $54,000 per job per year under a scenario of 3,000 jobs that last for 10 years rather than a minimum of 15 years.
- On top of the very substantial cost of the new tax credits, there’s the cost of existing tax breaks for manufacturers (which would already essentially zero out Foxconn’s corporate tax liability), plus the costs of huge local infrastructure investments, the cost of prioritizing work on the I-94 corridor, potential costs to state taxpayers from making a guarantee to cover up to 40 percent of local losses from spending for the project, and the unknown costs from unprecedented exemptions from environmental regulations.
|Scenario 1||Scenario 2||Scenario 3||Scenario 4|
|New Foxconn jobs||13,000||3,000||3,000||3,000|
|Duration of jobs||15+ years||15+ years||10 yrs (2020-29)||10 yrs (2020-29)|
|Total payroll through 2034||$8.9 billion||$2.4 billion||$1.6 billion||$1.6 billion|
|Total capital investment||$9 billion||$9 billion||$9 billion||$5 billion|
|Total jobs tax credits||$1.5 billion||$412 million||$275 million||$275 million|
|Capital expenditure credits||$1.35 billion||$1.35 billion||$1.35 billion||$750 million|
|Total of the new tax credits||$2.85 billion||$1.76 billion||$1.62 billion||$1.03 billion|
|New tax credits per job||$219,231||$587,381||$541,588||$341,588|
|New credits per job per year||$17,273||$39,159||$54,159||$34,159|
Our report addresses the misimpression some people have that the proposed state “tax credits” – which will pay up to 17 percent of payroll costs and up to 15 percent of capital expenditures – will be offsets against the corporate income taxes that will be owed by Foxconn. That is not the case; our analysis explains that Wisconsin currently has two very generous tax breaks that make it highly unlikely that manufacturers like Foxconn will owe any corporate income tax on their net profits. That means the state will be writing huge checks to Foxconn each year for the cost of the tax credits.
One positive aspect of the proposed legislation is that new tax subsidies are tied to job creation and capital spending in Wisconsin, which is not the case for the massive giveaway known as the Manufacturing and Agriculture Credit. Nevertheless, the structure of the proposed deal allows Foxconn to do very well by investing in automation and taking full advantage of the capital expenditure tax credit, rather than focusing on jobs and trying to maximize the new jobs tax credits.
Even under the state’s relatively optimistic assumptions about job growth, the proposed subsides are far greater per job created than any significant subsidy deal the Wisconsin has proposed in the past, and the numbers get much worse if we assume that Foxconn prioritizes automation. Wisconsin policymakers and state citizens need to think carefully about the different scenarios, after removing our rose-colored glasses.
One of the questions that we need to think about very carefully is whether a corporation that is induced to locate here by such large subsidies is going to stay when those subsidies end, or when another state offers an even better deal. And policymakers should think about how these subsidies would affect the demands of other companies who play the game of threating to locate elsewhere.
Finally and most importantly, we have to think very carefully about the effects of the proposed legislation on the state budget and whether there are more effective ways to invest billions of dollars of state and local tax revenue.
More about the Foxconn Facility
- $3 Billion Foxconn Boondoggle Sells Out Wisconsin’s Future to Foreign Corporation - State Rep. Lisa Subeck - Aug 17th, 2017
- Op Ed: How to Get a Better Deal From Foxconn - John Torinus - Aug 17th, 2017
- Data Wonk: Will Foxconn Deal Fight Poverty? - Bruce Thompson - Aug 16th, 2017
- Governor Walker Moderates Foxconn Roundtable Discussion in Green Bay - Gov. Scott Walker - Aug 16th, 2017
- Op Ed: Where Will Foxconn Find Workers? - State Rep. Gordon Hintz - Aug 16th, 2017
- Vukmir: The time is now for Foxconn - Assistant Majority Leader Leah Vukmir - Aug 15th, 2017
- Foxconn tax break could exceed $1 million per job - State Sen. Jennifer Shilling - Aug 14th, 2017
- Paul Ryan Challenger Opposes $3 Billion Corporate Handout to Foxconn - Cathy Myers - Aug 14th, 2017
- The State of Politics: 10 Tough Questions About Foxconn Deal - Steven Walters - Aug 14th, 2017
- Campaign Cash: Did Foxconn Lobby Illegally? - Wisconsin Democracy Campaign - Aug 12th, 2017
- Statement from Rep. Barca Regarding Republican Amendment to Foxconn Bill - State Rep. Peter Barca - Aug 11th, 2017
- Statement: Amendment to Special Session Assembly Bill 1 - Wisconsin Assembly Speaker Robin Vos - Aug 11th, 2017
- Op Ed: Renegotiate the Foxconn Deal - Matthew Flynn - Aug 11th, 2017
- Murphy’s Law: Walker’s Desperate Deal With Foxconn - Bruce Murphy - Aug 10th, 2017
- Foxconn Deal Flounders in State Legislature - One Wisconsin Now - Aug 10th, 2017
- If ‘Ifs’ and ‘Buts’ Are Candies and Nuts We’ll Have Foxconn Deal Paid Off in 2043 - One Wisconsin Now - Aug 9th, 2017
- Rep. Shankland: Statement on Foxconn Analysis - State Rep. Katrina Shankland - Aug 8th, 2017
- Foxconn Fiscal Analysis Deeply Troubling for Wisconsin Taxpayers - State Rep. David Crowley - Aug 8th, 2017
- Statement from Rep. Barca on New Fiscal Analysis of Proposed Foxconn Deal - State Rep. Peter Barca - Aug 8th, 2017
- Rep. Hintz Statement on Foxconn Cost to Taxpayers - State Rep. Gordon Hintz - Aug 8th, 2017
- Campaign Cash: Bill Has $10 Million Giveaway to Fiserv - Wisconsin Democracy Campaign - Aug 8th, 2017
- Wisconsin Veterans Chamber of Commerce Calls For Foxconn Project to Include Disabled Veteran Owned Businesses - Wisconsin Veterans Chamber of Commerce - Aug 7th, 2017
- Wisconsin Budget: The High Cost of Foxconn - Jon Peacock - Aug 4th, 2017
- What Does the Foxconn CEO Say About His Employees? - One Wisconsin Now - Aug 4th, 2017
- Foxconn Hearing: Big Promises, Little Details, Lacks Transportation Plan - State Rep. David Crowley - Aug 3rd, 2017
- One Wisconsin Now Testimony on Foxconn Subsidy Legislation - One Wisconsin Now - Aug 3rd, 2017
- No Guarantees to Prevent Wisconsin Tax Dollars From Subsidizing Illinois Jobs in Foxconn Deal - One Wisconsin Now - Aug 2nd, 2017
- Unnecessary to Sacrifice Natural Resources for Foxconn - Wisconsin League of Conservation Voters - Jul 31st, 2017
- Statement from Rep. Barca on Foxconn Developments - State Rep. Peter Barca - Jul 28th, 2017
- The Contrarian: Walker’s Reelection Now A Certainty - George Mitchell - Jul 28th, 2017
- Eyes on Milwaukee: Foxconn Loves Wisconsin, Walker - Jeramey Jannene - Jul 27th, 2017
- Governor Walker, Foxconn Founder and CEO Terry Gou Sign Memorandum of Understanding in Milwaukee - Gov. Scott Walker - Jul 27th, 2017
- REALTORS® Welcome Foxconn - Greater Milwaukee Association of REALTORS® - Jul 27th, 2017
- MATC Statement on Foxconn - Milwaukee Area Technical College - Jul 26th, 2017
- Statement from Rep. Barca on Foxconn Economic Development Announcement - State Rep. Peter Barca - Jul 26th, 2017
- Milwaukee County Executive Chris Abele Statement on Foxconn Announcement - County Executive Chris Abele - Jul 26th, 2017
- Global High-Tech Manufacturer Foxconn Announces $10 Billion Investment, Will Create 13,000 Jobs in New Wisconsin Campus - Gov. Scott Walker - Jul 26th, 2017
- Foxconn Frenzy: Proceed with Caution - State Sen. Chris Larson - Jul 26th, 2017
- Shilling cautious on Foxconn announcement - State Sen. Jennifer Shilling - Jul 26th, 2017
- Op Ed: Loss of Talgo Train Hurts Foxconn Deal - James Rowen - Jul 20th, 2017
- Mayor Barrett Supports Siting Foxconn Facility in Southeastern Wisconsin - Mayor Tom Barrett - Jul 17th, 2017
- On the Air: How Likely Is It Foxconn Will Create 10,000 Jobs? - Urban Milwaukee - Jul 13th, 2017
- Murphy’s Law: Walker Building Yesterday’s Economy - Bruce Murphy - Jul 13th, 2017
- Eyes on Milwaukee: Foxconn Lands in Milwaukee - Jeramey Jannene - Jul 10th, 2017