Subsidies for US Foxconn plant

The proposed plant in Wisconsin may receive up to $2 billion in taxpayer subsidies.
LCD Panels are already dirt cheap, and there is no reason to believe that this will change anytime soon.
Should taxpayers really be forced to pay for this? Foxconn is not a charity, and they, like any other for-profit company, should not have to rely on taxpayers to prop them up.

Why should college students get subsidies? They aren’t charities, either.

There are lots of reasons for a county/state/country to subsidize a company, usually involving “winning” a new location. That doesn’t have to be a bad thing.

This Wisconsin/Foxconn deal seems rather strange though. Over $200k in tax breaks, PER JOB. And possibly 4 times that, if Foxconn doesn’t hit the higher employment forecasts. Given Foxconn’s track record, they will do everything possible to keep employee numbers down, since that is a huge part of the costs of their business.

On top of that, in order to find 3k to 13k new employees, I bet that facility will be located close to the Illinois border, and Chicago. So a chunk of employees will be riding the train out of Chicago each morning, and returning each night.

Seems like Wisconsin would be better off taking that money and hiring teachers and social workers and police, and all of the other public service jobs that Wisconsin has been cutting.

I understand the subsidies are mostly tax breaks. So the state isn’t actually paying that amount. The company gets to build a factory and operate it without paying taxes for a number of years. Which is a huge loss of potential revenue, and there will be a cost to the state to support that operation (e.g. transportation infrastructure). But it’s not as if the state is taking $2 billion out of the general funds and handing it over to Foxconn.

p.s. This article from 2013 is about a study that found that for these corporate subsidies, the average cost per job was $456,000.

Two words: Paul Ryan.


Sounds to me like the goal is to try and keep jobs in America that would normally go overseas. The loss in tax revenue may be considered worth it for the new jobs.

Whether that’s true, I don’t know. But it doesn’t seem to be inherently bonkers.

And whether social service jobs would be better is something I don’t know, either. I could definitely see the argument. But I could also see the argument that more low-level jobs are needed.

Chicago does not extend to the Illinois/Wisconsin border. It is located considerably south of there.

The morning train (I deliberately use the singular) to Kenosha takes 1 hr 45 minutes from downtown Chicago or 1 hour 27 minutes from the north edge of Chicago. But most potential workers do not live in a train station. They have to get to a train station first. Most potential blue collar workers who are desperate enough to take a train that distance for a job probably live on the south or west sides of the city. Add an additional hour to get from their homes to a train station where trains to Wisconsin run. (Some people might quibble about that last part, but when the next train to Kenosha is in 6 hours, you have to leave splash in your schedule to make connections and allow for worst-case scenarios.)

Plus we don’t know exactly where the factory will be. Will it be next to a train station? If not, add additional time to get from a train station to the factory.

I really doubt any significant number of people will be riding the train from Chicago.

There are lots of unemployed people in Milwaukee, Racine, and Kenosha Wisconsin. Across the Illinois border, you have economically depressed areas in North Chicago (which is not part of Chicago) and Waukegan with people who might want a job.

Tax breaks do not cost taxpayers a cent. The government is going to take as much as possible from poor taxpayers no matter what crony deals are brokered.

Just speculating here:
Yes (well, this part isn’t speculating, I know the area very well), it is close to the Illinois border, probably about 20 minutes. It’s also about 20 minutes from the (much larger Kenosha (170k people) and Milwaukee (950k people) counties (one in either direction). It may be worth noting a few things, while the Illinois border is very close, Chicago isn’t. Chicago is still over an hour away. There’s a train that will get you very close to the plant and people will, no doubt, commute, but it’s not like it’s a 20 minute drive from Chicago.
Also of note, we have a HUGE Amazon fullfilment center in the next county over (Kenosha). Some quick googling says Amazon, in Kenosha has about 2000 emloyees and the warehouse is about 1 million sq ft, times 4 stories.

Foxconn is looking at a site that (if memory serves) is roughly 1 mile x 2 miles, which works out to 54 million sq feet and the last claim I heard is that they may be looking for 13,000 employees. Other than a few small houses (like, literally just a few), it’s nothing but corn in the area that they want to go which means they’ll also be employing tons of (union, if that’s your thing) labor to get it up and running. I’m guessing local business will also have to grow as a result of it. The little fire station will have to be upgraded. The hospital may have to be upgraded. There’s certainly going to be a demand for more restaurants, strip and regular malls. That city (and specifically that area) just can’t support 13,000 people showing up in shifts all day long.

Another thing worth mentioning is that about 10 years ago they (Kenosha, 'next door) lost a Diamler Chysler plant. While it was in it’s death throes for the last 10 years, in it’s heyday (back in the 60’s, it had 16k workers).
So, as for tax money and people coming in from IL, as I said, there’s still going to be cash flowing through the city/county/state) so there’s that, plus the property tax will be HUGE compared to a corn (or cabbage) farm. And even if half the people come up from IL, that’s still a lot of people in Wisconsin.

@Andy, you said that we don’t know exactly where it’ll be. Last I read it’s going to be bordered by Durand, Washington, the freeway and Hwy H. I have no idea where the train stops are but A)Durand and Washington are Hwy 20 and Hwy 11 and B, it wouldn’t surprise me at all if either they added a train stop or Foxconn ran a free shuttle.

The state is offering incentives of $200-250 million per year, for up to fifteen years, so the incentives amount to $15,000 to $19,000 per job, per year. And these are jobs for which the salaries average about $53,000 annually. This article from The New York Times mentions previous promised developments by Foxconn in India, Indonesia, Brazil and Pennsylvania that either went nowhere or saw a much lower level of investment. Also manufacturing LCD panels for things like HDTVs is a vicious, low-margin business. I think Sony even got out of the business entirely, and instead sources its flat panels from LG, Sharp or someone else.

Certainly the state is paying through the nose for these jobs. It’s probably as bad a deal as the ones some cities make with sports teams for stadiums. Plus given the salaries they’re going to be offering, I’m not sure why Foxconn wouldn’t just continue to produce the displays in China, or at worst, another low-cost country. Frankly, I’m skeptical about the whole thing

All of the national news stories I can find say that the location is still unknown, so thank-you very much for sharing your local information!

The Amtrak Sturtevant station is at Washington Ave and Wisconsin St, not far off the NE corner of the property.

Amtrak takes 1 hour to get from Chicago Union Station to Sturtevant. Union Station is the only Chicago stop for Amtrak. I assure you that there is close to nobody living within walking distance of Union Station who is going to be looking for that type of job. So they still have to get to/from Union Station. And you can’t just jump off the bus in front of Union Station as the train is pulling out, you need to add some connecting time and a bunch of splash time in case of delays. Then, since it’s a huge factory, you need to add some time to get from the Sturtevant station to the employee entrance, wherever that will be.

A monthly Amtrak ticket from Chicago to Sturtevant is $400 (one-way is $24). Plus you’ll need a $100 monthly CTA ticket to get to to Union Station from your home. And I am not sure that Amtrak has the excess capacity to carry a few thousand more passengers on any given train.

I still think it’s highly implausible that they will be shipping masses of people in by train. Maybe a handful, but nothing significant.

More likely, there may be some busing from Milwaukee or Kenosha and maybe even Waukegan.

IIRC from reading the article last night (so I may be wrong), it’s not that they were offered some amount of money per job. It’s that they were offered a certain amount of money for a certain amount of jobs and if they hire that many workers they didn’t get the money? Am I mistaken, it I thought it was an all or nothing thing?

So? Every looks at their stuff and says 'made in [not America] this one will be and you’re annoyed before they’ve laid the first brick. I understand it’s hard to come up with concrete reasons for being skeptical, but…try.

They [Wisconsin, and other states] have done similar packages to entice numerous other businesses. This is much bigger but not much different. However, it’s very different than a sports stadium where they build buy and then directly bill the people that live and visit the city by was of an increased sales tax until the bill is paid down (in Milwaukee we’re still paying Miller Stadium with a half percent increase in our sales tax).

Just caught it in the Biztimes . com a few days ago.

Hwy V and 11? Something like that?

People don’t realize (even people from Milwaukee) when we* joke about it being all corn (or cabbage out there)…it really is nothing but corn…like really…just effin corn. Ignoring the ‘where are we going to get our food’ this is a good place to build while displacing as few people as possible. There’s like 1 person and 1 business there on the property.

No, I think you are thinking of the Metra (UP-North) Station in Kenosha. That was the train line that I was thinking of in the original post I made.

The Amtrak station is here.

I didn’t even catch that you said it was on 20/Washington, I think I was just trying to picture where it was.
In fact, as I reread what I wrote, there’s a lot of typos, I overslept and was running late for work, but I had to get in a last one rambling, half asleep post in.
I’m surprised I managed to get all the coding done correctly within the 5 minute edit window, it took me a few tries.

Anyways, I can picture the area, I’ve driven past the train station a million times. I always wonder what the two big towers are as I’m approaching.

(FTR, while I’ve lived in Milwaukee most of my life, I’ve also spent a few years living in both Kenosha and Racine)…also,

There’s certainly room for skepticism about state and local tax breaks to lure new company facilities or other kinds of development.

However those tallies are typically the estimated gross cost (in lost tax revenue or outright public spending where that’s the case which it sometimes is, like for related infrastructure). But that’s only one side of the equation in fiscal impact, the other being tax receipts a) on the other economic activities besides the company’s income/property taxes, like the workers’ salaries and purchases which otherwise would not have happened, and b) the direct tax receipts from the company after expiry of the tax break deal. Both of those are more speculative than the gross cost of the tax breaks, but it’s not as if they don’t exist at all.

Also it has to be put in some context of other expenditures local/state govts might make to boost employment besides tax abatements for companies to locate new facilities there. One might suggest stuff like ‘better education’, or general infrastructure but those don’t cost zero either.

If the direct tax abatement cost is that small a fraction of the average salary at the plant, and for a limited time, it doesn’t look so exorbitant on its face seems to me. To take yet another alternative (national) protectionist measures to keep jobs in the US can cost a multiple of the salary of the jobs ‘saved’ (especially counting the jobs lost because input prices rise, eg. the jobs you lose at a Caterpillar by raising steel prices with tariffs).

As to people questioning the economic viability from Foxconn’s POV I think it’s reasonable to assume they know better than random internet posters what’s a good investment for them all things considered. So the angle which criticizes this based on analyzing the electronic display market isn’t very convincing, not directly at least. Again more realistically it’s what else would WI do to boost employment, and particularly in ‘family wage’ jobs*, that would be more efficient. Without just quasi-emotional appeal to ‘invest more in social services’.

*in purely economic terms there’s no reason to be concerned what particular types of jobs people do, you just want to increase (state or national) GDP per head. In political and social reality it does matter.

In all the debate here about jobs and cost I have not yet read about the Keynesian multiplier. I think the mutiplier only exists when progressive administrations are doing the wheeling & dealing. Neither have I read about the importance of promoting manufacturing expertise. Again, the importance of this sort of stuff seems relevant mostly when solar panels are being produced.

Any sort of spending will have a Keynesian multiplier. The question is how to get that multiplier most cheaply. If the incentives you’re offering per job are more than the job pays, then you’d be better off all around just hiring the workers yourself directly, to work on public infrastructure or something.

Somebody help me understand the opposition to providing tax breaks to companies for providing jobs.

My reasoning is:
In the Foxconn deal, the company builds a factory in Wisconsin. People get jobs. The paychecks and just about all the other economic activity related to these jobs is taxed. Foxconn is not. So the government of Wisconsin sees an increase in tax revenue.

If there was no Foxconn, and the government wanted to provide these jobs, they would hire 3000 - 13000 at $54K a year, then all the same things would happen in terms of economic activity, but they would spend $162,000,000 to $700,000,000 million a year in salaries, and probably collect far less in taxes.

Another scenario without Foxconn and the government providing jobs is that part of Wisconsin remains farmland, the tax base steadily shrinks because farming income is on the decline and people tend to move out of farming communities.

In the first scenario, the money is coming from outside of Wisconsin’s economy, but in the second and third scenario, money is not coming from outside Wisconsin’s economy. Tax money is lost in the 2nd two scenarios and gained in the first scenario.

In my mind, it would make sense to provide tax breaks to companies as long as the net benefit was an increase in tax revenue due to the economic activity associated with the company’s activity. What’s the problem with my reasoning?

That’s true. It obviously depends in many people’s view which side the politicians are on who make these deals. You could have the exact same deal and opposite conclusions if Scott Walker v eg. Jerry Brown were making it. Does anyone deny that’s true? Most people have no clue about economics, they know their politics from their gut.

The other thing which partly relates to your point, in the US, is federal v state or local decisions. As in a lot of other things states and localities operate in closer to (though still not purely) a frictionless competitive environment v other states/localities more than the US position v other countries. That’s often seen as cutting only one way, that companies can put states/localities in competition to make ‘bad deals’ they can’t help making. But it can be the other way around in the long run: if you conduct the (state/local) govt’s approach to business in a stupid way (could be excessive giveaways, could be expecting businesses to fund public goods they can just avoid by moving), it catches up with that state/locality and becomes apparent, ‘laboratories of democracy’. When the federal govt subsidizes stuff inefficiently it tends to take longer and is harder to see the cost.

Which is why I have much less problem, especially as non WI resident, with WI giving breaks to Foxconn than the federal govt giving subsidies to solar panels, and it really isn’t just what I think about TV screens v solar panels.