Wisconsin won’t break even on Foxconn plant deal for over two decades

Wisconsin’s plan to treat Foxconn to $3 billion in tax breaks in exchange for a $10 billion factory is looking less and less like a good deal for the state. In a report issued this week,...

Wisconsin’s plan to treat Foxconn to $3 billion in tax breaks in exchange for a $10 billion factory is looking less and less like a good deal for the state. In a report issued this week, Wisconsin’s Legislative Fiscal Bureau said that the state wouldn’t break even on its investment until 2043 — and that’s in an absolute best-case scenario.

How many workers Foxconn actually hires, and where Foxconn hires them from, would have a significant impact on when the state’s investment pays off, the report says.

The current analysis assumes that “all of the construction-period and ongoing jobs associated with the project would be filled by Wisconsin residents.” But the report says it’s likely that some positions would go to Illinois residents, because the factory would be located so close to the border. That would lower tax revenue and delay when the state breaks even.

And that’s still assuming that Foxconn actually creates the 13,000 jobs it claimed it might create, at the average wage — just shy of $54,000 — it promised to create them at. In fact, the plant is only expected to start with 3,000 jobs; the 13,000 figure is the maximum potential positions it could eventually offer. If the factory offers closer to 3,000 positions, the report notes, “the breakeven point would be well past 2044-45.”

The authors of the report even seem somewhat skeptical of the best-case scenario happening. Foxconn is already investing heavily in automation, and there’s no guarantee it won’t do the same thing in Wisconsin. Nor is there any guarantee that Foxconn will remain such a manufacturing powerhouse. (Its current success relies heavily on the success of the iPhone.)

“Technological advances and changes in Foxconn's market share, operating procedures, or product mix could significantly affect employment and wages at the proposed facility over time,” the report notes. The authors warn that their analysis should be seen as “high speculative” given their projections out to 30 years in the future. “Especially for a manufacturing facility and equipment that may have a limited useful life.”

On the other hand, there is the potential that the report is missing some of the benefits that Wisconsin hopes to gain from this investment. The authors note that the factory “would also provide greater employment opportunities for the state's present and future workforce, and add a new sector to the state's manufacturing economy,” and it could be missing some of those compounding effects. Though the deal sounds expensive in the short term, the state could be looking for the long-term benefits of a bigger manufacturing sector.

Lawmakers in the state seem skeptical that they’ll actually receive the benefits that Wisconsin Governor Scott Walker claims the deal will bring them. The Milwaukee Journal Sentinel reports that the state Senate’s leader has said he doesn’t have the votes yet to pass the tax package Walker has promised.

Scott Fitzgerald, the Senate Majority Leader, said the state needed to proceed with caution. “That's what we're doing right now,” Fitzgerald said, “is the due diligence to make sure this is a good deal for the state and a good deal for locals — and ultimately creates this kind of high-tech campus that everyone's hoping for.”