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Tax incentive package for new Wisconsin component plant promises jobs, raises questions

by Laura Tomaka ~ September 2017 ~ Stateline Midwest »
In September, Wisconsin lawmakers advanced an economic incentive bill (AB 1) to forge a deal with computer component manufacturer Foxconn to build a new facility in the state.
The Taiwanese firm, which supplies companies such as Apple, Google and Amazon, announced in July its desire to locate a $10 billion factory employing up to 13,000 people in southeastern Wisconsin.
With the number of potential jobs and 20 million square feet of floor space, the facility, which will primarily produce flat-screen LCD displays, would be one of the largest manufacturing campuses in the world.
The proposed incentives would include tax credits and exemptions on the state’s construction sales tax.
The plan, which has been approved by the Wisconsin Assembly (the Senate had not voted on the bill as of the time of publication) would give Foxconn $3 billion in refundable tax breaks over the next 15 years.
“The incentive package is ‘pay-as-you-grow,’” explains Rep. Joan Ballweg, a member of the committee that held public hearings on the bill. “Foxconn will receive tax incentives based on how many jobs they create and how much they invest in the facility.”
According to the bill, a credit would only be given for jobs paying at least $30,000 per year with benefits. The average salary is expected to be about $54,000.
“There are also claw-back requirements to protect taxpayers if Foxconn were to ever stop doing business in Wisconsin,” says Ballweg.
Despite the promise of so many new jobs and the payback provisions, some worry about the investment of public dollars in private companies and have asked how long it will take the state to make its money back.
The Wisconsin Legislative Fiscal Bureau estimates a payback time of 20 years, but says this does not include the impact of spin-off businesses resulting from the plant.
An Ernst & Young report assessing the incentives’ potential impact estimates that 35,000 new jobs could be realized as a result of the facility’s indirect benefits, including its construction. Also, Foxconn has estimated the facility’s annual payroll at $700 million and said it would purchase $1.4 million per year in goods from Wisconsin firms for its supply chain.
“When you account for all the other ways Foxconn will have an impact on the state, ... it puts Wisconsin on the global map and is adding an entirely new industry to the state and country,” Ballweg says, “I am confident the state will see a worthwhile return on its investment.”
In light of the state’s low unemployment and shortage of skilled workers, it is likely that some workers will come over from Illinois (where unemployment is higher), decreasing income tax revenue in Wisconsin. To ensure a pipeline of qualified Wisconsin workers, the bill includes $20 million in workforce training funds.

 

(Editor's note: The Wisconsin Legislature passed the Foxconn incentives package on September 14.)

 

Article written by Laura Tomaka, staff liaison to the Midwestern Legislative Conference Economic Development Committee.