Bruce Murphy
Murphy’s Law

The True Costs of New Foxconn Deal

Evers new deal is a huge improvement but will still cost taxpayers $523,000 per job.

By - Apr 28th, 2021 04:43 pm
Foxconn. Photo by Dave Reid.

Foxconn. Photo by Dave Reid.

To the end Robin Vos insisted the Republicans couldn’t have done more to protect taxpayers in the state’s deal with Foxconn and that any effort by Gov. Tony Evers to rewrite the contrast was “a bunch of B.S.”

“The only thing that could happen is to make the deal worse for Wisconsin,” the Republican Assembly Speaker insisted. 

The original deal was the largest subsidy any American government had ever awarded a foreign company. Its total costs grew to $4.1 billion or $1,774 per Wisconsin household.

Yet Vos and Republicans insisted taxpayers were protected because there would be no payments to Foxconn until it created jobs. 

Except for all the upfront costs. The state spent $168 million on roads and highways needed for what was supposed to be a massive campus, “the eighth wonder of the world,” as Donald Trump dubbed it. The Village of Mount Pleasant and Racine County committed to spending $808 million for sewer, water and other costs and have so far expended $256 million on the project. And the American Transmission Company, pushed by then Gov. Scott Walker, has been installing high-voltage power lines and a new substation to service Foxconn’s promised campus at a total cost (counting estimated interest payments) of $257 million, which will be charged to electric ratepayers in Wisconsin.  

That’s $681 million, with another $552 million to come, without Foxconn building the plant it promised or even one year’s worth of jobs as stipulated by the contract. 

Adding insult to injury, the state deal also had a giant loophole that allowed Foxconn to hire workers, collect state investment tax credits and then lay off the employees. Fortunately the Evers administration figured this out and never allowed Foxconn to play this trick. 

Evers insisted on renegotiating the deal, and after more than two years of stonewalling Foxconn finally agreed. The governor hailed the new deal as “an agreement that treats Foxconn like any other business and will save taxpayers $2.77 billion.” 

The deal slashes the amount paid by the state to $80 million in exchange for Foxconn creating 1,454 jobs and drastically reduces the per-job tax credit from 17% to 7%, the Evers administration noted. 

But the true cost to taxpayers for this deal includes all the upfront costs already incurred under Walker’s plan, which are $681 million. That makes a total cost of $761 million for 1,454 jobs, or more than $523,000 per job.

That’s an astounding per-job cost. Until signing the Foxconn deal the most expensive deal Walker had done gave a subsidy of $54,545 per job to the German candy manufacturer Haribo, while the most expensive subsidy given by his predecessor, Democratic Gov. Jim Doyle, was $35,000 per job to Mercury Marine, as Urban Milwaukee reported.

The new deal requires Foxconn to pay a minimum salary of $53,875 per job. Assuming such an employee pays a typical state income tax of about 5%, it would take 194 years for the state to recoup its costs. Even if the average wage paid to Foxconn workers is considerably higher than the contracted minimum, it’s safe to say the state will never get its money back. 

But that’s only based on current spending on Foxconn. Mount Pleasant and Racine County have promised to spend another $552 million on the Foxconn project, which would greatly increase the cost per job. It’s a safe bet local officials will try to cut back the planned spending and/or renegotiate the deal, but unclear at this point how much lower the costs will be.  

All of which leaves Walker, Vos and Republicans looking like fools who were snookered by a Taiwanese company with a documented history of making false promises. Vos, in what amounted to claiming up is down or black is white, declared the new deal “actually gives the company even more financial incentives than the original did.” 

No, Mr. Speaker. It saves the taxpayers billions. It’s still the worst deal ever done by Wisconsin, but it would have been — and actually was — so much worse.

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2 thoughts on “Murphy’s Law: The True Costs of New Foxconn Deal”

  1. ghurtado says:

    Bruce, while I don’t disagree with the high cost per job, the analysis may overstate the cost. True, the cost per job created by Foxconn is as you state, but there may be considerable job creation by others that locate in the now-available portions of the enormous industrial park built for Foxconn. It will probably take years to fill because the industrial parks in Kenosha County are closer to Illinois where the industries are coming from. Who knows? The subsidy may get down to $400,000 per job.

  2. David Coles says:

    @ghurtado, even if that is true, it is a bad investment. Governments should not be in the business of subsidizing sprawl. Sprawl robs older cities and towns of vitality, industry, jobs, and investment, and perpetuates unsustainable, car-dependent lifestyles that are wrecking our planet and annually leading to tens of thousands of car crash fatalities, plus countless injuries. All sponsored by taxpayers!

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