Foxconn To Get $230,000 In Incentives For Every Wisconsin Job Created

Tyler Durden's picture

To much fanfare, President Donald Trump on Wednesday announced that Taiwanese electronics giant Foxconn, best known for making the iPhone, will build a new plant producing LCD panels in Wisconsin that will bring thousands of jobs to the state. On the surface it's a great deal: in what's being called the largest economic development project in state history, Foxconn plans to build a $10 billion plant that will eventually employ as many as 13,000 people, according to the White House and Gov. Scott Walker.

"It starts today with this investment in Wisconsin," Foxconn chairman Terry Gou said at announcement in Washington D.C. on Wednesday.

The plant is expected to open in 2020 and be on a 20 million square-foot campus on at least 1,000 acres, a campus Walker's office has dubbed "Wisconn Valley" according to the Wisconsin State Journal.  The plant could be the first of several facilities the company intends to build in the United States and will start with 3,000 employees, a staff that could eventually grow by 10,000.

Furthermore, Walker's office projected the project would create at least 22,000 "indirect and induced jobs" throughout Wisconsin and will generate an estimated $181 million in state and local tax revenues annually, including $60 million in local property taxes.

In making the announcement, Trump was near-euphoric: “This is a great day for American workers and manufacturers and for everybody who believes in the concept and the label ’Made in the USA,” the president said. “The construction of this facility represents the return of LCD electronics and electronic manufacturing to the United States, the country that we love, that’s where we want our jobs,” he continued.

Trump gave himself credit for the deal: “To make such an incredible investment, [Foxconn Chairman Terry] Gou put his faith and confidence in the future of the American economy,” the president said. “In other words, If I didn’t get elected, he definitely would not be spending $10 billion.”

The Foxconn chairman validated Trump's boast, crediting the president with spurring the investment: "I met you three times. Each time you emphasized the importance of manufacturing in America and providing high-skilled jobs for American workers," Gou said about Trump. He also explained why here, and why now: “Why do it here? TV was invented in America, yet America does not have a single LCD factory. We are going to change that. And it starts today with this investment in Wisconsin. This is a win-win-win strategy,” Gou said, adding he is “committed to great, great jobs for American people.”

According to the State Journal, the deal with Foxconn was "a culmination of many months of discussion" between a team of Republicans from the White House, Wisconsin and Foxconn officials, a White House official said. The negotiations included Trump, his senior adviser and son-in-law Jared Kushner, chief-of-staff Reince Priebus, Ryan and Walker.

* * *

And while superficially the agreement is a slam dunk for both Wisconsin, and US workers - especially in a high-tech sector that has over the years shifted to China - reading between the lines of the deal makes one wonder who is getting the best deal. 

While a White House official said there will be no new federal programs to provide new incentives for Foxconn to build in Wisconsin, he added that the company could be eligible for existing incentives offered by the federal government.

What subsidies? The "incentive package" contemplated as part of the Foxconn deal will total $3 billion over 15 years, including $1.5 billion in state income tax credits for job creation; up to $1.35 billion in state income tax credits for capital investment and up to $150 million for the sales and use tax exemption. In other words, just over $230,000 for each new job that Foxconn may (or may not) create.

To some this is a problem: "The bottom line is this company has a concerning track record of big announcements with little follow through. Given the lack of details, I’m skeptical about this announcement and we will have to see if there is a legislative appetite for a $1 to $3 billion corporate welfare package," Sen. Jennifer Shilling, D-La Crosse, said, referring to the company's 2013 announced plans to build in Pennsylvania that never materialized. Fitchburg Democratic Rep. Jimmy Anderson blasted the deal as a multibillion-dollar handout" and said "taxpayers should not be subsidizing private corporations at the expense of our children, school and roads."

Yet not all Democrats blasted the deal: lawmakers from the region where Foxconn is expected to locate were more receptive to the news. Sen. Robert Wirch, D-Pleasant Prairie, called the news "a great thing for southeastern Wisconsin;" Barca hailed it as "an exciting opportunity." Barca, D-Kenosha, said he met with Foxconn officials earlier this month and has been in touch with the Walker administration about its discussions with the company. "I've heard that they are family-supporting jobs and that the wages, on average, are actually more on the high end of the spectrum," Barca said.

However, besides one's view on incentives - which ultimately have to be funded somehow by taxpayers - there is another potential problem: this is not the first time Foxconn has come out with bombastic promises to create US jobs, only to quietly reneg on its pledge.

In 2013, Foxconn said it would spend $30 million to build a plant in Harrisburg, Pennsylvania. Then-Gov. Tom Corbett (R) personally helped craft the deal and hailed the plan in a statement, saying “Pennsylvania is once again leading the way through integrating technology into manufacturing.” The plant didn’t get built. The next year, Foxconn announced a $1 billion investment in Indonesia. The year after that, $5 billion in India. Though the announcements caused many excited headlines, the ambitious plans never came to fruition, according to an investigation published in March.

Scott Paul, president of the Alliance for American Manufacturing, a group that advocates for favorable manufacturing trade policies, applauded the Trump administration for trying to bring consumer electronics manufacturing to the U.S., but said he’s skeptical of Wednesday’s news. “I’ll be excited about this Foxconn announcement when I see actual paychecks going to workers in Wisconsin,” Paul said.

Furthermore, Gou has regularly made noise about bringing a Foxconn factory to the United States. Earlier this year, the company said it was considering several states for a new plant that would make digital display panels. An administration official said the deal had been in the works for months, with talks being led by Trump son-in-law Jared Kushner. At a speech in Wisconsin in June, Trump hinted an announcement could be on the horizon. "Just backstage, we were negotiating with a major, major, incredible manufacturer of phones and computers and televisions, and I think they’re going to give the governor a very happy surprise very soon,” Trump said.

Whether or not the deal is real or just another mirage, remains to be seen, but another question involves relative wages: it is clear that Foxconn would not pursue US expansion if the economics were not right. Surely the generous incentives were a key part of the calculus, but from a bigger picture perspective, one wonders if - in at least one industry - the US has not reached wage parity with China.

As Forbes recently reported, "average wages in China’s manufacturing sector have soared above those in countries such as Brazil and Mexico and are fast catching up with Greece and Portugal after a decade of breakneck growth that has seen Chinese pay packets treble." That's average: wages for highly skilled sectors such as LCD production are far greater; in fact, it is distinctly possible that they are now higher in China than equivalent all-in comp (with incentives) in the US, especially for a company like Foxconn.


Foxconn factory

Recall that this is the same Foxconn that not so long ago Foxconn replaced 60,000 factory workers with robots due to rising labor costs.

In a statement to the BBC, Foxconn Technology Group confirmed that it was automating "many of the manufacturing tasks associated with our operations" but denied that it meant long-term job losses.

 

"We are applying robotics engineering and other innovative manufacturing technologies to replace repetitive tasks previously done by employees, and through training, also enable our employees to focus on higher value-added elements in the manufacturing process, such as research and development, process control and quality control.

 

"We will continue to harness automation and manpower in our manufacturing operations, and we expect to maintain our significant workforce in China."

... and perhaps add to it in the US, with the proper amount of sweeteners of course. Because if the wage equivalency tipping point between high-tech jobs in China and the US has indeed been reached (or is close to it) the consequences for both the Chinese and US economy would be dramatic. If that is the case, Foxconn's first foray into the US may be just the beginning.

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jmack's picture

hhahhahahahaha Wisconsin Manufacturers, you stupid idiots, you want to do business in your state, first go be successful in China, then they will allow you to move back to Wisconsin with a bearable tax and regulation burden.

Common_Law's picture

I bet robots classify as "employees" if you read the fine print. 

Mr Pink's picture

I owned a small business in Kenosha and I recieved exactly $0 billion in tax breaks and incentives and $0 for the 25 jobs I created.

I was taxed to death and my special kickback was a bankruptcy after the banks gambled our money away

californiagirl's picture

I own a small business in Silicon Valley. We manufacture and sell  our products on site. For the past several years we have paid a reduced sales tax (about half the nornal rate) on our manufacturing equipment. All you have to do is present a simple form BOE 230-M to your vedor.  We have saved tens of thousands of dollars as we purchased more CNC machines and tooling. Many small business manufacturers I know, and many of our vendors and some local customers, did not know about this credit, so I informed everyone that I could.  Unfortunately, staying breast of such incentives requires self education and extensive reading.  Even the CNC vendor was not aware. We were the first company to request the sales tax reduction and provide the certificate.  Another problem was that the seller lumped the entire purchase under one lump sum, including the freight, installation services and training, which are not taxable services.  I was the first to ask this vendor for a detailed invoice, which further reduced our sales taxes. Not to mention, I didn't want to pay annual property taxes on training and freight, etc.  Our vendor was then able to help his other customers save tax money, which I am sure was greatly appreciated.

 I do not find credits like this, that are not specific to a single business, as outrageous. What is shocking, is that it is California offering such a credit.  If Foxconn was the only company in the state getting such an advantage, then you can be outraged. If I were a manufacturing company in that state, I would be looking into it so I can make sure I was not missing out on some credits I might be eligible for.

 In the 1990s, the state of Oregon was successfully offering special tax exemption deals to semiconductor companies to attract manufacturing facilities. Certain covenants had to be maintained, like a certain number of jobs filled by local residents.  Intel and others built multi-billion dollar fabs in the state.  

Foreign government's have been doing these types of deals for decades, attracting American companies and jobs. Ireland and Hong Kong are prime examples. I know Hong Kong individualized deals with each large company, and even made counter offers against tax deals offered  by other countries.  Are we just supposed to stick our heads in the ground and let it continue?  We used unconventional war/military methods to gain our independence from the British crown. This is not the time to just stick with being conventional.

As a CPA, and former auditor, I have seen so many small business owners, and even large companies get into trouble over the years because of ignorance of the tax and business laws, and other requirements, such as OSHA, and lack of oversight of employees they hire or business partners that handle the administrative, financial and tax tasks.  I think everyone who wants to start a company should be required to take a short class, a 1 to 2 day class so they know what they need to watch out for. There are plenty of local tax specialists and lawyers that also do not educate their clients adequately. It should be a pre-requisite to obtaining a business license. It doesn't have to be expensive, perhaps $50, and could be taught at local junior colleges or other school facilities on weekends, or even split over several weekday evenings. People don't need to be experts, but they need to know what questions and requirements to discuss with their "advisors" or what to research themselves.  If you just hand someone a book with hundreds of pages, many are unlikely to read it. A class, where they can just listen and can ask questions, would be much more effective. 

HenryKissingerBilderberg's picture

I think everyone who wants to start a company should be required to take a short class, a 1 to 2 day class so they know what they need to watch out for. There are plenty of local tax specialists and lawyers that also do not educate their clients adequately. It should be a pre-requisite to obtaining a business license.

YES, specially those terrorist lemonade stand girls, and those gardening boys, they should understand NO GOY shall make money without paying tribute to the MAFIA.

Canary Paint's picture

What are you talking about? She is trying to give concrete advice about navigating the regulatory environment.

Is actually talking about doing business not political enough?

Yippie21's picture

Meh...   at least it's not a NFL stadium deal.   This will put some folks to work.  There are NO large business moves anywhere anymore without massive tax enticements.  It bugs me Foxconn picked Ryans' district though.  He's going to run on this, just watch.  Like he had jack squat to do with it.

Obsidian Samctum's picture

Kinda like trump taking credit for shit he is suppose to do?

NoVa's picture

Bull Shit - nearly all long term lease/investment deals have a "no cash cost"  up front incentive.  The cash flows are are the back end of the LT lease.

 

NoVA

Icewater Enema's picture

Quit complaining. We here in WI won. We'll take the jobs. Fuck Michigan and that other state that was in the running. Will Trump take the credit for it? Sure he will. Who cares. At least he coerced Foxconn into moving some operations here. Good for him. What the fuck did Obama do for American workers? 

TrajanOptimus's picture

Nothing.

This is a big win for the US, not just Wisconsin.

Kaiser Sousa's picture

kool...

now like like the Chinese before them  Ameridumbs will be afforded the opportunity to make shit that they wont be able to afford...

Dow 60,000.

SHEEPFUKKER's picture

Try getting your average fat lazy American who is on multiple benefits to work a slave labor job. Good luck cheeseheads. 

Kaiser Sousa's picture

no doubt...just more circus and fuel for the Fraud Markets to reach "new all time recorde'rer highs off of...

hope ur well man...

SHEEPFUKKER's picture

Cheers KS. You too brother. All the best. 

Never One Roach's picture

There's only one catch working on these jobs; you actually have to work!

oi vey!!

AA and FSA peeples prefer gubmint jobs where you don't work and can't be fired. College "teaching" is even bestest, esp after the admin is extorted into handing them life-time tenure in such essential STEM areas as, "the History of Hip Hop Music"  so they don't look rayciss. Then the prof can publicly recommend killing all white people without any chance of being fired.

 

Texas A&M won't fire professor who called for killing white people

 

http://www.washingtonexaminer.com/texas-am-wont-fire-professor-who-calle...

yogibear's picture

Zimbabwe American style as the Fed prints with more QE's that are larger each round.

Yellen, Cash-Carry and the rest, let's really get the print-fest going and do $1 trillion/month QE.

Mena Arkansas's picture

But if you're a small white-owned business - not so much.

earleflorida's picture

and there you have it???

we need to renegotiate for a better deal...[?]

and,... and whatt about the 'Foxconn Stadium' that the MLB/ NFL will have the state [coffers] subsidize! (on the taxpayers dime)

Peak Finance's picture

230,000 in incentatives, Fake News and Fake Math

First, lets pretent that the plant is built and operating at full throttle

Then lets pretend thsat they are actually going to pay the full 35% corporate tax rate (LOLZ!!!!!!!!!!)

Then we ignore all of the other economic benefits of the plant

Then we take the dfifference between our unicorn numbers and the tax "CREDITS" (which means we are letting them keep more of their own money)

and

PRESTO!!!! 230,000 in Corporate Welfare per job!

 

roddy6667's picture

It can't make anything close to a profit without massive governmemt subsidies, just like the wind power and solar industries.

Corporate welfare on steroids. It doesn't make America great again.

Peanut Butter Engineer's picture

Not exactly a subsidy more like the government says ok we won't tax you for next 15 years if you build here for up to $3 billion max profit but of course we will tax your workers and companies that sell you their raw resources or services. It wasn't government's money to begin with. And they will still be taking their piece of pie from the workers.

HenryKissingerBilderberg's picture

It can't make anything close to a profit without massive governmemt subsidies, just like the wind power and solar industries.
Corporate welfare on steroids. It doesn't make America great again.

the wellfare T-REX GE? does wind too

Deep Snorkeler's picture

Pre-Robot People

Dear sad low wage worker,

also known as a pre-automation entity,

your freakish tattoos call out for erasure.

Powerless, voiceless, futureless:

the world economy is not going your way,

your socio-economic class is becoming

extinct, a bounty has been paid for your demise.

Taxpayers extorted, states grasping at straws,

your paycheck a source of humor.

Too-Big-to-Bail's picture

Foxconn's employees will shoot up by thousands all earning $30,000 per year for a net profit of $200,000 per year per employee

mendigo's picture

More zeros on the balance sheet.

Does it really matter at this point?

Yipee party on!

iopiopiop's picture

Only at ZeroHedge can you get people so cynical they hate on a new factory and pretend we are paying the company to be here and they don't pay their workers anything and we are just better off having no jobs and none of the prosperity that surrounds a factory of this size.

roddy6667's picture

What's not to hate. You and I and every taxpayer are paying for this factory to come to America. It is just a redistribution of money, another form of welfare. Yes, we are better off having no jobs than these kinds of jobs. This is just tax dollars flowing to Taiwan.

It would be cheaper and better for the country just to mail checks to the "employees" and not build the factory.

therover's picture

Dead on.

Fuck Foxconn and it's taxpayer bail out.

Where the fuck are the incentives and bail out's for small business owners ? The REAL fuel of the local economies ? 

I'm gonna subsidize workers (probably 2/3rds of them foreign at some point....or robots) in Wisconsin ? Get the fuck out !

Fucking smoke and mirrors.....AGAIN. 

not dead yet's picture

You and so many others bagging this deal are just stupid fucks who lack comprehension or can't read. The "deal' is based on them getting a break on their taxes. Taxes that would not be paid if the factory were built in another state. There are no cash payments from the taxpayers like the "deal" that raised the sales tax for the shoppers of SE Wisconsin to build a stadium for the Brewers. Hardly any protest out of taxpayers when governments around the country allocated billions of taxpayer cash for stadiums and arenas for rich guys in pajamas to play with balls. Some of those states pay teams if attendance comes up short. Studies have shown that the net effect to the local economy is nill or slight on average unlike a manufacturing plant that is a boon for the economy. Even some high schools stadiums are paid for by the taxpayers. When the Bradley Center opened in Milwaukee it was hailed as the best arena in the country. Then other arenas started adding big buck skyboxes so now the Bradley is considered by the greedy operators a piece of shit without those skyboxes and they want the taxpayers to pony up for a new arena. The state of New York not only gave Solar City incentives but they built with taxpayer money a factory and gave it to them. Not much bitching about that. Since making solar panels is a loser as the Chinese continue to drive out panel manufacturers around the world Tesla and Panasonic will make batteries there.

Someone commented about Ryan using this as a platform to run on. Ryan could be the sleezyist dirtbag on the planet and still win as ever since Dem Les Aspin left the House to become Sec of Defense every candidate put forward by the Dems was a POS or worse. This time will be no different.

 

Silver Savior's picture

I think the idea is stupid to tell ya the truth. The fact that we have to pay these companies off like this just goes to show you we are totally fucked. Putting gthat money toward social programs would take it further.

dchang0's picture

Hey, so far, the real world has proven us "cynics" right.

Socialism doen't work. Check.

Corporate welfare doesn't work. Check.

Personal welfare doesn't work. Check.

In each case, taking money by force from some people to give to other people (aka taxes) doesn't create the same synergies (where the whole is greater than the sum of its parts) as persons freely conducting completely voluntary exchanges.

What you call prosperity isn't real. It's just a shell game where one politically-favored group looks prosperous at the expense of some disfavored group. The $230,000 per job "created" here would have been spent by the taxpayers creating or sustaining other jobs in other industries by their purchases.

Iskiab's picture

I think free trade is a good thing, but whenever I hear about these corporate welfare deals I have my doubts.

Trade is good yes, but companies that ask for hand outs to invest make me sick, it's like governments bid to get the investment in their country, with governments constantly having to sweeten the pot to attract investment.

Trump has a good idea in tackling the root of the problem. Tell the fuckers if they want access to the US market they better invest in it. I'd ask for bids to be able to sell your shit in the US.

It's sad, but that's the state of modern economies; low quality forced obsolescence products, intentionally making products incompatible with each other (stopping gains from interchangeable parts), and now I'm suggesting a form of mercantilism. No wonder productivity has been shit for so long, productivity has taken a back seat to more dollars now.

shimmy's picture

Winning...by giving companies billions of dollars after begging they set up plants in your country.

Twee Surgeon's picture

230,000 divided by 15 = $15,333.333333333. I met a young girl that briefly acquired a job at a fast food chain (Mc D's) She said there were vast incentives for the Corporation to hire people who were recently released felons, people in rehab programs (by order of the State, County, whatever.) And immigrants of some classifications that I did not fully determine. (Jobs also then for drug councilors, probation officers, therapists whose half cousin is a public defender and it is all so fucking Sleazy and doomed to some horrific collapse that can not come soon enough !)

Apparently the .Gov pays a lot of the wages for these people ? So basically the .Gov is financing quite a lot of "Business Activity" that I had no idea existed.

It really does look like the US Government is getting to be the Only 'Employer' left in the USA, via backdoor stealth.

From Unions to Corporations IMC and multi generational nepotism. This is a very sticky situation for the Nation. Romanesque, if you like.

Non Participants WILL be Oppressed. How did we get here ! https://www.youtube.com/watch?v=I1wg1DNHbNU

Gen. Ripper's picture

Funny I don't see a factory being built in Appalachia

FoggyWorld's picture

That's because Paul Ryan doesn't live there.

Stormtrooper's picture

Hey Janet.  We need $3 billion printed up real quick to cover some "incentives".  Can you have it ready tomorrow?

Alex DeLarge's picture

 I wonder how many of these jobs will be filled by H1B visa holders once it's determined there are no qualified American applicants?

Yen Cross's picture

  Somehow ~ the specifics of this deal, DON'T add up.

  WE gave away some prime land to create some jobs, that are technical, in order to fill our quota, and make the numbers fit for BLS.  <much?

 

Silver Savior's picture

It' too little too late!

High tech manufacturing, low tech wages. lol. It's not worth working anymore.

not dead yet's picture

You're typical of why the US is sinking into the gutter. It's bad enough we have plenty of useless slugs not wanting to work but even worse are those like you who condone not working and justify it with every excuse in the book. Unless it's dangerous to your health any job is better than no job even if the pay is low and the boss is an ass. Plenty of highly successful people started out in shit jobs but one will never be a success or better ones living situation if one sits at home and makes excuses and spends their days getting stoned or drunk. 

cesarsp_us's picture

I don't know if I should cry or laugh..

EmeraldWI's picture

Foxconn wages will still allow workers to collect a food benefit. Hopefully the suicide rate will be lower at this plant.

FoggyWorld's picture

Well they may qualify for all the benefits we the US taxpayers give to illegals. Housing, healthcare, college tuition discounts, smart phones, etc.

cesarsp_us's picture

Now we have to bribe corporations to come and give us their 3rd world minimum wage jobs????

# winning bitchezzz

ilovetexas's picture

LCD, high tech? Come on! LCD, that's yesterday's high tech, alright?

therover's picture

MAGA

My Ass is Getting Anialated. 

NoWayJose's picture

What a Conn job!

FoggyWorld's picture

What's odd about it is that Foxconn shut down it's line in China several months back and laid of permanently 60,000 workers because they are going to use robotics in China.

So the question is what are these jobs going to consist of in the US and are they just shipping us their now obsolete equipment?  And who is paying for that equipment?

And possibly these products will only be sold in the US with higher prices than elsewhere because Apple, for one, is building or contracting new facilities in India and with what manufacturing technology?