Crony Capitalism

$3 Billion Foxconn Deal Is Biggest Corporate Subsidy in Wisconsin History

Economists say the deal makes little economic sense.

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Foxconn factory

To get Taiwanese electronics manufacturer Foxconn to build a $10 billion factory in Southeast Wisconsin, Gov. Scott Walker is promising nearly $3 billion in tax giveaways, the largest subsidy package, in state history.

"This is a great day for America, it's a great day for Wisconsin, and it's a great day for Foxconn," Walker said.

Great for Foxconn, almost certainly, but not for most of the people of Wisconsin, Matthew Mitchell, a senior researcher with the Mercatus Center at George Mason University, says.

"With enough subsidies," Mitchell tells Reason, "you could get orange growers to relocate to Wisconsin."

Foxconn will get up to $1.5 billion in income tax credits, another $1.35 billion in credits for investment capital, as well as a $150 million sales tax break for funds spent on construction.

Included in the state legislation is $252 million in highway upgrades intended to service the eventual Foxconn site, as well as a promise that the state will assume 40 percent of the cost of any additional local government incentives offered to the company should the deal fall through. Environmental rules will also be waived for the Foxconn site.

"That money might have been spent on a genuine public good, or it might have been spent on a state-wide tax reduction," says Mitchell.

According to proponents, the jobs created by deal make the subsidies worthwhile. The agreement reached between Walker and Foxconn, is supposed to generate 13,000 jobs, 10,000 of which will be for construction of the plant.

Wisconsin will be shelling out $231,000 for every projected job added under the agreement. The Milwaukee Journal Sentinel reports that Foxconn will get 17 cents in tax credits for every dollar its spends on employees as part of the deal.

The high public cost of each job is evidence the Foxconn project is not suited to area. "The last thing a region wants in order to prosper is a bunch of firms that aren't really suited for the region," Mitchell says.

Cato trade policy expert Dan Ikenson agrees. The Foxconn deal has less to do with creating prosperity in Wisconsin and more to do with President Trump's potential to crack down on trade.

"Foxconn is hedging against a U.S.-China trade war which it feels is increasingly likely," Ikenson says. "If it's stuck in Shenzhen snapping iPhones together and there is a trade war, they could be jeopardy."

Having a manufacturing plant in the United States would allow Foxconn to ship its goods to its American customers without the fear of being hit with tariffs says Ikenson.

Other companies have made similar moves under the Trump Administration's brand of bullying and incentivizing.

Carrier agreed to stop the relocation of some jobs to Mexico thanks to a mix of state-level incentives and the possibility of federal retaliation. Ford also agreed to halt construction of a new plant in Mexico following public condemnation from the president.

As Reason has previously reported, Carrier ended up moving many of those jobs south anyway. The economic logic of lower labor costs and less regulation proved more decisive for the company than tax credits it was given to keep jobs in America.

Expect more cronyist deals during the Trump Administration, Ikenson says.

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44 responses to “$3 Billion Foxconn Deal Is Biggest Corporate Subsidy in Wisconsin History

  1. Honest question I’m always confused about with these kinds of deals. Does the government actually give the company all this money directly, or does it is simply allowing them to not pay that much in taxes? Does the government actually “lose” money, or does it just not make money. (Other than the highway upgrades, which is at cost to the state).

    1. Included in the state legislation is $252 million in highway upgrades intended to service the eventual Foxconn site, as well as a promise that the state will assume 40 percent of the cost of any additional local government incentives offered to the company should the deal fall through. Environmental rules will also be waived for the Foxconn site.

      It’s a combination of giveaways and tax breaks, but tax breaks that appear so targeted at Foxconn, they amount to giveaways.

      There is an argument that local media outlets like to make which essentially boils down to: [Company] is building infrastructure and creating jobs! Who pays for it?

      It’s an argument so dumb, one wonders how these journalists are able to successfully dress themselves in the morning.

      However, the libertarian counter to the argument is predicated on the idea that the company pays all the normal taxes and fees which are, by definition, designed to cover the infrastructure upgrades, increased road use and what not.

      If all of those fees are waved for one company, then the journalist argument holds some water.

      1. It’s only a ‘giveaway’ if you believe that not taking is giving.

        1. No, the state is literally giving. See below.

          1. In this particular case it’s both, but a ‘tax break’ is not giving someone something unless you assume that that money already belongs to the government so ‘keeping’ more of it becomes a gift when they take less.

            1. I don’t disagree.

        2. i think paul’s point was that the taking-away from every other businesses is the actual ‘give-away’ here; the comparative advantage that FC receives in reduced Cost of Business, while everybody else has to offer competitive salaries etc while still taxed at the normal rates.

    2. If it’s a tax break it’s just the state not collecting an estimated amount of revenue that would otherwise be paid.

      1. Except if FoxConn never existed in Wisconsin, it would not otherwise be paid.

  2. Not taking is giving.

    1. Giveaways are exactly that. We’re not talking mere tax breaks which means not being robbed by the State, but actualy given money as a bribe to open shop there.

  3. I can find a couple real losers – all the local businesses, that already pay taxes, that will now have their experienced employees lured away and will have to raise wages to keep them or, in some cases, go out of business. Not that I object to market forces causing wages to rise, but this is artificially created because government is putting its thumb on the scales.

  4. Wisconsinite here. While the author conflates handouts with tax credits, and while any reasonable business owner should be happy that his fellow managed to shrug off the shackles of the state, in this case because Wisconsin already waives manufacturing taxes, Foxconn will indeed be getting direct payments from the Govt. I think the number in the bill was up to $1.5 billion.

    I was a huge proponent at first, but now I’m just disappointed, though not for the reasons the author poorly describes.

  5. I always laugh when they count construction jobs as “jobs”. I’ve had my job for 20 years, does that count as 20 jobs or just one?

    This crap is usually as much of a handout to trade unions as it is to the companies themselves. They aren’t “creating” jobs as I doubt any additional construction people are created – it just creates “scarcity” which means that the cost of every other construction contract in Southeast Wisconsin will now cost more as each contract now has to compete for pretty much the same workers. So hundreds of much smaller projects won’t get done as the cost of labor increases too much to make the small projects worthwhile. But since government had nothing to do with those smaller projects, they don’t count and don’t register with voters who have no understanding of economics (nearly all of them).

    1. In free markets, that kind of conflict is factored in automatically. That’s how prices and markets work. These clowns don’t know that, are too stupid to understand it, are too politically woke to want to understand it, and so they fuck things up like this and pat themselves on the back for the grand job they’ve done.

  6. Carrier agreed to stop the relocation of some jobs to Mexico thanks to a mix of state-level incentives and the possibility of federal retaliation. Ford also agreed to halt construction of a new plant in Mexico following public condemnation from the president.

    So seeing that Trump is actually enacting a successful Bernie Sanders-style policy, will people still support Sanders? If so, why?

    1. Intentions, sir. Bernie only has good ones. Trumps are only negative. So I’m told.


  7. Environmental rules will also be waived for the Foxconn site.

    Aaaand lawsuit. Fuck those guys if you’re a domestic manufacturer. Equal protection under the law my ass. A clearer case of ‘kiss my ring’ I can’t recall.


    According to proponents, the jobs created by deal make the subsidies worthwhile. The agreement reached between Walker and Foxconn, is supposed to generate 13,000 jobs, 10,000 of which will be for construction of the plant.

    So, only ‘creating’ 3,000 jobs which I presume is your point. That being said, there are plenty of people who will point to this as a success. Especially if those end up being Union jobs, which wasn’t clear from the article or I missed it outright.


    As Reason has previously reported, Carrier ended up moving many of those jobs south anyway. The economic logic of lower labor costs and less regulation proved more decisive for the company than tax credits it was given to keep jobs in America.

    And yet, while American companies leave for foreign countries because of advantageous labor conditions and low regulations those countries industries are moving here because of the possibility of a tariff that may never materialize. This is interesting, actually.

  8. MWGA!

  9. Can someone explain how you “spend money on a state-wide tax reduction”?

    I’d expect better from Mercatus

    1. Government is a big shell game. The overall premise is that if they create 13,000 jobs, that’s 13,000 families, or roughly 50,000 new residents. They all have to live somewhere. That means new housing, schools, roads, etc, and of course more police, social workers, etc etc etc.

      Who pays for all that? Why taxes of course! But they have just waived bowcoo bux of taxes, but still have to pay for those services.

      That’s why you call it an expense, even though most of those jobs will go to current residents, not newcomers, and so there really is no need for much in the way of new infrastructure or new civil servants (gag me).

      See, shell game.

      1. Smoke and mirrors. Foxconn will hire a contractor to do the building. The contractor will bring in workers from out of state for a year or so, and they will be gone. Foxconn will bring in their own people for most of the ‘high paying’ jobs, and hire only for the jobs watching the computers build other computers. And lots of those jobs will go to people new to the state who came just for the job.

        If a politician gave a union boss a couple of thousand dollars in a back room in exchange for ‘labor peace’, they would both be crooks. So how does doing it out in the full light of day turn bribery into ‘a huge win for Wisconsin”?

        1. Pretty sure that a lot of the money those new residents make is going to spread around in the local community (rent, food, etc). That’s the point.

      2. That means new housing, schools, roads, etc, and of course more police, social workers, etc etc etc. Who pays for all that? Why taxes of course!

        1. Taxes don’t pay for the workers’ housing.
        2. Are employers normally expected to pay taxes to finance their employees’ residential communities infrastructure? What about people who commute? Their employers don’t pay any taxes to the jurisdiction they live in. And yet there are roads, schools, cops, SJWs, etc.

        1. Don’t pretend to be so simple minded. You aren’t fooling anyone; you really are that simple minded.

          1. Nothing is more simple-minded than logic, it seems.

            1. Reading between the lines is hard when you’re pretending to be simple minded.

              Ya know …. whenever some ass wants to raise corporate taxes, I always ask them what they think businesses do with taxes. How do they pay them? Eventually they grudgingly admit that taxes are passed right on through in prices, and customers pay those taxes.

              So when you pretend that employers don’t pay taxes wto expand employee infrastructure, you’re not fooling anybody except yourself.

  10. HOW IS NOT TAKING CONSIDERED GIVING JUST BECAUSE ITS TARGETED AT ONE SUGARBABY COMPANY WHILE EVERYONE ELSE CONTINUES TO GET SOAKED WHY DOES RAISIN HATE TAX CUTS

    1. The other companies are free to move to other states that will give them tax breaks as well.

      1. So we are cool with cronyism now. I didn’t get that memo.

  11. This is the same stupidity Reason puts out there about film tax credits being “subsidies”.

    If Foxconn did not move to WI, they would pay no taxes to WI.
    With the tax breaks, they will pay LESS taxes to WI.

    How is agreeing to the latter a “subsidy” when the state actually gets more money than it otherwise would?

    1. Because, since Wisconsin already waives manufacturing taxes, WI will pay Foxconn cash over 7 years to the tune of $1.5 billion of taxpayer money. Plus they will finance the highway system to get to the Foxconn campus.

      It is a direct wealth transfer from the taxpayer to the company. Though, since the article was poorly written I don’t blame you for the confusion.

      1. Re: Liberty (and the rest of it),

        The author is clear in that he makes the distinction between tax breaks and the tax credits the WI state will pay Foxconn for building a factory in WI. Those are subsidies.

  12. The Location module does not provide a way to display or filter node views, based on the location of their author user, provided by the User Locations submodule.
    Obat cacar ular alami
    This is useful if you have for example a site with suppliers and product nodes added by those suppliers, products for wich you want to show the supplier location (a location for each product node beeing unuseful).

    1. I did not node that.

  13. Limited State

    http://hotair.com/archives/201…..l-content/

    1. Trump using the term “paddy wagon” is offensive to Irish-Americans

      As offensive as Martha Stewart using the term “patio furniture”?

      1. As an Irish-American, I take no offense to “paddy wagon”.

        Next media attempt at TDS is going to be what?

  14. “With enough subsidies,” Mitchell tells Reason, “you could get orange growers to relocate to Wisconsin.”

    With enough subsidies, you could get me to not grow corn in Iowa.

  15. tax giveaways

    Reason now calls money the government doesn’t take from you a “tax giveaway”.

    It’s fair to complain about the crony capitalism inherent in the deal. But “tax giveway” is just Leftist propaganda.

  16. This is the second article I believe from Britschgi where he saids that not taxing is the same as the state spending money.

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