Foxconn fails to qualify for Wis. tax credits
Trump-backed subsidies withdrawn from scaled-down factory
Protesters take issue with a controversial Foxconn electronics factory in Wisconsin on the day of the formal groundbreaking in 2018. (Flickr/Charles Edward Miller)
By Ted Cox
In a case of pointed interest across the border in Illinois, a major Wisconsin factory has failed to qualify for state tax breaks after it scaled down plans for its operations.
The Associated Press reported Monday that Wisconsin had formally denied what was projected to be up to $3.6 billion in tax credits for a Foxconn factory located in the southeast corner of the state near Lake Michigan.
Taiwan-based Foxconn is the world’s largest electronics manufacturer, and it dangled a $10 billion plant in front of several states in search of a sweetheart tax deal three years ago. Bruce Rauner, then governor of Illinois, attempted to woo the factory, but it eventually fell to Wisconsin and then-Gov. Scott Walker with the promise of between $1.2 billion and $3.6 billion in tax subsidies.
The deal was announced at the White House in 2017 with President Trump praising a “transformational” factory that he called the “eighth wonder of the world,” and he attended the groundbreaking the following year along with Walker and Paul Ryan, the former Wisconsin congressman who was then U.S. House speaker.
President Trump (center) joined in the groundbreaking for the Wisconsin Foxconn factory in 2018. (Executive Office of the President of the United States)
But the huge government subsidies became a key campaign issue as Democrat Tony Evers unseated the Republican Walker as governor later that year, and Evers’s administration has enforced a strict reading of the tax deal, threatening a year ago that Foxconn wouldn’t qualify, as it was even then in the process of scaling down ambitious plans for operations at the plant.
At the same time, an academic study titled “The Economics of a Targeted Economic Development Subsidy” took issue with the entire idea of such huge government support being granted to a single factory: “The weight of economic theory suggests that these subsidies do not work and may even depress economic activity,” the study stated, projecting that they would have an overall detrimental effect on the local and state economy by draining precious resources. It projected “that under realistic scenarios the subsidy may depress state economic activity by tens of billions of dollars over the next 15 years.”
AP reported that “after the deal was signed, Foxconn said it was downsizing the factory to what is known as a Generation 6 plant rather than a Generation 10.5 plant. The facility envisioned now would make smaller thin-film transistor liquid crystal display screens for cellphones and other devices, rather than the larger screens that were first proposed.”
On Monday, Wisconsin Economic Development Corp. Secretary Melissa Hughes sent a formal letter to Foxconn stating that its new factory didn’t qualify for the tax subsides under the signed deal and can't get state tax credits unless the original contract were changed.
According to AP, Hughes sent the letter to Foxconn Vice Chairman Jay Lee stating that "Foxconn's activities and investments in Wisconsin to date are not eligible for credit."
AP reported that “state Rep. Gordon Hintz, the Democratic minority leader and a longtime critic of the project, said the announcement ‘cements Foxconn's legacy in Wisconsin as one of broken promises, a lack of transparency, and a complete failure to create the jobs and infrastructure the company touted in 2017.’”
Earlier this year, before the COVID-19 pandemic hit, state Sen. Ram Villivalam of Chicago and state Rep. Bob Morgan of Deerfield opened the General Assembly session by announcing that they’d be joining “a national bipartisan campaign to phase out corporate giveaways by establishing an interstate compact” in which states pledge not to try to outdo each other in offering tax breaks and subsidies to corporations. They charged that states competing against one another to offer more to lure corporate investments could easily become a race to the bottom, ultimately to the detriment of the state, its workers, and its economy.
“Corporate giveaways are one of the least effective uses of taxpayer dollars for job creation because companies too frequently take tax incentives to choose locations that they would have chosen anyway,” Villivalam said. “So instead of creating additional jobs, they simply deplete a community’s tax base instead, which often affects communities who can least afford it. This legislation is a good first step in phasing giveaways out and in creating a level playing field for all employers.”
“While our state budget is already starved by excess tax breaks, we want to build support over time and appeal to our colleagues who don’t wish to unilaterally disarm in the giveaway game,” Morgan added. “This is a reasonable go-slow approach, and can help us refocus our state budget on priorities such as education and human services funding.”
Their Corporate Giveaways Compact proposal, submitted as Senate Bill 2502, had bipartisan support, including conservative state Sen. Jim Oberweis as a co-sponsor, but it got caught in the coronavirus crunch as the General Assembly had to abbreviate its spring session. It was sent to the Senate Assignments Committee and is still pending in the legislature.