Author Topic: Podcast Culture  (Read 1321 times)

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Offline kimmy

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Re: Podcast Culture
« Reply #15 on: December 26, 2018, 12:17:46 pm »

Really interesting takedown of how governments offer too many incentives to bring industry to depressed areas.  In this case it's Foxconn and Wisconsin.

I was reading about the Foxconn debacle back in September or October... prior to the election.  Gov. Walker had given Foxconn so much in incentives and tax breaks and so-on to build a new plant in Wisconsin that it had become widely viewed as a boondoggle... something that was supposed to be a signature piece for Walker's administration became something that was so negatively viewed that they weren't even talking about it in their re-election campaign.

The size of the subsidy was stunning. It was far and away the largest in Wisconsin history and the largest government handout to a foreign company ever given in America. Like most states, Wisconsin had given subsidies to companies in the past, but never higher than $35,000 per job. Foxconn’s subsidy was $230,000 per job.


As the size of the subsidy has steadily increased to a jaw-dropping $4.1 billion, Foxconn has repeatedly changed what it plans to do, raising doubts about the number of jobs it will create. Instead of the promised Generation 10.5 plant, Foxconn now says it will build a much smaller Gen 6 plant, which would require one-third of the promised investment, although the company insists it will eventually hit the $10 billion investment target. And instead of a factory of workers building panels for 75-inch TVs, Foxconn executives now say the goal is to build “ecosystem” of buzzwords called “AI 8K+5G” with most of the manufacturing done by robots.


Back when the subsidy was $3 billion, Wisconsin’s non-partisan Legislative Fiscal Bureau estimated that it would take until 2043 for taxpayers to recoup the subsidy. This long payback period was due to Walker and Republicans effectively cutting the state’s corporate income tax for manufacturers to zero in 2011. This meant the subsidies to Foxconn would not be a tax write-off, but billions in cash that would be paid back by state income taxes paid by Foxconn workers. At $4.1 billion, the payback date for the state was likely 2050 or later.

Some doubt the subsidy will ever actually be recouped. “Realistically, the payback period for a $100,000 per job deal is not 20 years, not 42 years, but somewhere between hundreds of years and never,” wrote Jeffrey Dorfman, an economics professor at the University of Georgia, in a story for Forbes. “At $230,000 [or more] per job, there is no hope of recapturing the state funds spent.” And this was before the subsidy had risen to $4.1 billion, or about $315,000 per job.

Some of these jobs being created may actually be filled by imported workers from China.  This article also mentions Foxconn having been given 1000 acres of land for free. There's a video of a morbidly obese Wisconsin family who find themselves facing relocation as the state uses "eminent domain" to secure the land needed.

Today's news that Foxconn will likely import workers from China to fill jobs at the Wisconsin plant should be another warning sign to politicians who go all-in to land a major employer in their town, city, or state. Once the deal is inked and the taxpayers are holding the bag, plans can (and do) change for reasons that may not have been anticipated or included in the original arrangement. Wisconsin would be better off with lower tax rates for everyone, instead of subsidizing a giant employer. I'm sure the cities vying to host the second Amazon headquarters are paying attention, right?

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