Economy

Scott Walker Promises Record-Setting Corporate Welfare

JM Ashby
Written by JM Ashby

Wisconsin Governor Scott Walker and Trump recently announced that infamous electronics manufacturer Foxconn, a company that had to install netting so their employees could not jump to their deaths, will build a factory in Wisconsin that will produce liquid crystal displays (LCDs) like those found in many televisions.

Foxconn's commitment did not come without an extremely heavy cost, however, and Governor Walker has reportedly agreed to pay Foxconn $3 billion, and that's not all.

From the Milwaukee Journal Sentinel:

They will have to pay cash — writing checks for up to $200 million a year [for 15 years].

The subsidies for the deal would amount to nearly 50 times the previous record paid by Wisconsin taxpayers to secure a manufacturing plant in the state. Instead of getting the previous state standard of 7 cents in tax credits for every $1 in qualifying payroll checks to workers, Foxconn would get 17 cents in credits — a change that will require sign off from lawmakers.

Manufacturing profits are exempt from taxes in Wisconsin so, in addition paying Foxconn $200 million per year for 15 years, the state will not collect a single cent of taxes from the company.

Does anyone even believe LCDs will be the most prominent display technology in 15 years? This is like using taxpayer money to take out a 30-year loan to build a football stadium for a team that will relocate to another city in 10 years. But in this case, LCDs may have already peaked before the factory is even built.

In any case, the plant is expected to employ only $3,000 people initially, meaning the state would pay the company more than $1 million per job created; jobs that have an average salary of $53,000.

And there other significant problems with the deal flagged by the Journal Sentinel:

To carry out the deal with Foxconn, lawmakers would have to expand on existing state incentives known as enterprise zones, a tool that requires companies to demonstrate investments and job creation before getting state money.

A firm called Ernst & Young, which was paid by Foxconn, produced a report estimating that 17 jobs would be created at nearby businesses for every 10 jobs created at their new factory. They're magic asterisks.

Typically, an enterprise zone employer must first pay workers at least $30,000 a year — or more than $14 an hour — to qualify for jobs tax credits. The company can claim the credits for up to $100,000 of a worker's yearly salary.

Foxconn would get 17% of these qualifying salaries covered by state taxpayers instead of the usual 7%, according to the written understanding Walker signed Thursday. Foxconn would also get 15% of its capital investment paid back instead of the usual 10% — changes that would have to be approved by lawmakers.

I am reminded that one of Scott Walker's biggest embarrassments and failures was a job creation program (the Wisconsin Economic Development Corporation) that handed out incentives to companies that create jobs but never bothered track if any of them were actually creating jobs.

Now that I think about it, I believe that program did in fact create nearly as many jobs as Foxconn is promising to at a cost of $3 billion.

Walker's defunct WEDC program created approximately 2,100 jobs at a cost of just $124.4 million.

According to WEDC, the 27 awards were tied to the creation of 6,165 jobs, but so far only 2,106 have materialized. Many of the awards are tax credits contingent on certain job-creation goals being met. They include enterprise zone tax credits of $62.5 to Kohl’s Department Stores, $18 million to Kestrel Aircraft and $15 million to Plexus Corp.

Walker's cronies at the WEDC claimed to have created 6,165 jobs with a budget of $124.4 million.

Walker wants to give Foxconn $200 million per year for 15-fucking-years to create maybe 3,000 jobs.

I honestly have no idea if lawmakers in Wisconsin are thirsty enough to fuck themselves and their constituents with this deal that may only employ 3,000 people in a state with a population of nearly 6 million.

The Wisconsin state government and legislature are currently at a budget impasse facing increasing deficits and shortfalls for critical functions like transportation. It's anyone's guess how throwing a $3 billion corporate handout into the situation will improve it.

Foxconn says the proposed plant could employ as many as 13,000 "eventually," but they aren't promising that. They can't promise that because we don't know what the market for electronics will look like in 15 years or even in 5 years.

  • Badgerite

    As I understand it, his turning down a the high speed rail funded by the federal government that Obama offered this state puts Wisconsin at a competitive disadvantage in securing this manufacturing facility. So. There’s that.

  • muselet

    Republican economics are weird.

    –alopecia

  • Aynwrong

    I guess I should probably add Wisconsin to my list of states that use the “destroy everything and let whoever comes next clean up the wreckage model” of running a state economy.

    The GOP is a racket.

  • Scott Walker: Finally getting Chicagoians to cut Wisconsinites some slack since 2010

  • Dread_Pirate_Mathius

    This plan narrowly beat out Walker’s second choice of lighting the money on fire and using it to heat the governor’s mansion.

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