In a study released on Tuesday, the nonpartisan Wisconsin Legislative Fiscal Bureau concluded that the $3 billion taxpayer giveaway Gov. Scott Walker (R) and President Trump want to give to Foxconn in exchange for an LCD manufacturing plant in the southeastern part of the state wouldn’t be paid back for at least 25 years.
“[A]ny cash-flow analysis that covers a period of nearly 30 years must be considered highly speculative, especially for a manufacturing facility and equipment that may have a limited useful life,” the study notes. In other words, by the time the plant would theoretically pay off for taxpayers, it may be no longer be operational. No one knows if there will even be a need for these kind of LCD screens 25 years from now.
But even in the best-case scenario where the plant creates 13,000 jobs filled almost entirely by residents of Wisconsin — the study notes that “it is assumed that 10 percent of the projected new jobs will be filled by Illinois residents,” but because the plant might be built near the Illinois border, that percentage could be higher — the billions of dollars in tax credits the Taiwanese company would receive for payroll and capital expenditures wouldn’t be paid back until about 2042.
The following “break-even analysis” table is taken directly from the fiscal bureau’s study. It indicates the massive giveaway Republican lawmakers want to provide Foxconn would cause the state to lose money each year until 2033, with another decade passing before the incentives are paid back in full.
If the best-case scenario doesn’t come to fruition because the plant creates less than 13,000 jobs or more than 10 percent of the positions are filled by residents of neighboring Illinois, “the break-even point would be well past 2044-45,” the study notes.
Despite the hefty toll the deal would take on Wisconsin’s budget, Walker continues to tout it. In an op-ed published last Friday by the Milwaukee Journal-Sentinel, he asserted that a plant in which LCD panels are made “will have a transformational effect for generations to come in much the same way Silicon Valley transformed the San Francisco Bay Area and the Research Triangle transformed North Carolina. We’re calling it ‘Wisconn Valley.’”
Walker argues that the tax giveaway is ultimately worth it, because “$3 billion worth of incentives brings $10 billion in investment and more than $10.5 billion in new payroll to the state.”
Democratic state lawmakers aren’t so sure. In a statement, Rep. Gordon Hintz (D), a member of the budget-writing Joint Committee on Finance, writes that “in order to afford Governor Walker’s past corporate tax giveaways, deep cuts have been made to important priorities like our public schools, the UW system, and local community infrastructure.”
“Before the 2017-19 budget is even passed, the 2019-21 budget faces a billion dollar structural deficit,” Hintz continues. “As the LFB memo shows, if this multi-billion dollar tax deal goes as planned, taxpayers would pay one billion dollars more to Foxconn than the state would take in for the first 15 years. Taxpayer funded assistance this massive in size will certainly create budget problems for the state, and likely result in another round of cuts to our most valued priorities.”
Late last month, Trump celebrated and took credit for Foxconn’s pledge to build a major plant in Wisconsin during a White House ceremony, saying that “if I didn’t get elected, [Foxconn Chairman Terry Gao] would not be spending $10 billion.”
Thank you Foxconn, for investing $10 BILLION DOLLARS with the potential for up to 13K new jobs in Wisconsin! MadeInTheUSA pic.twitter.com/jJghVeb63s
— Donald J. Trump (@realDonaldTrump) July 27, 2017
Trump did not mention the taxpayer incentives that are part of the deal or the fact that Foxconn was was planning to open a manufacturing plant in the U.S. as far back as 2013.
Though the deal has the support of Walker and both chambers of the Wisconsin legislature are controlled by Republicans, it’s unclear whether it will be approved. On Wednesday, Wisconsin Senate Majority Leader Scott Fitzgerald (R) told reporters he’s unsure if he has enough votes to pass a bill granted the incentives to Foxconn, and asked for more time.
Fitzgerald cited the fiscal bureau’s study, saying its findings are “striking.”
“Is it going to be a good deal for taxpayers? A lot of that is going to be based on viability, on how this happens over the next 15, 25 years,” he added. “And what is the payback going to be? And it’s difficult to really measure that right now.