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Wisconsin offered Foxconn more than Virginia, N.Y. for Amazon
Nov. 17, 2018 8:00 am
The bundle of financial incentives Wisconsin offered to lure Taiwanese technology giant Foxconn's first major U.S. plant is larger than what New York, Virginia and Tennessee collectively offered to Amazon for far more jobs, a comparison of the two development projects shows.
The study renews nationwide discussion on what states and cities should offer large corporations in tax incentives.
Foxconn has said its $10 billion factory in southeastern Wisconsin will create up to 13,000 jobs that pay an average annual wage of $53,000.
The value of tax credits and breaks that Wisconsin has pledged for the project totals at least $3 billion, according to the Wisconsin Economic Development Corp., a public-private agency that helped assemble the package.
Per the contract, the state will halt some payouts if the company does not deliver on those promises.
Racine County and the village of Mount Pleasant, where factory construction is underway, have added extra infrastructure perks projected to cost $764 million, according a spokesman for Mount Pleasant.
Meanwhile, Amazon announced this week that New York, Virginia and Tennessee would split 55,000 positions with average salaries of $150,000.
Amazon is setting up new headquarters in New York's Long Island City and Virginia's Crystal City and a new operations center in Nasvhille, Tenn.
The New York and Virginia facilities are poised to get 25,000 jobs each, and the Tennessee location will see 5,000 jobs.
The three states chosen for Amazon's satellite offices in total pitched roughly $2.4 billion in subsidies and investments.
Amazon could qualify for additional tax breaks for its Long Island City campus, analysts say, but those incentives aren't specific to one company.
New York and Virginia also could up the company's reward if it exceeds the initial target of hires. (Amazon's chief executive, Jeff Bezos, owns the Washington Post.)
A number of lawmakers and residents in New York and Virginia have criticized the deal in the past few days in terms of the amount of the incentives as well as how the concentration of Amazon workers will affect the neighborhoods.
In any event, it appears Foxconn is receiving a far more generous subsidy package than Amazon.
Mark Maley, communications director for the Wisconsin Economic Development Corp., defended the contract with Foxconn Thursday, saying it remains a 'game changer for the state of Wisconsin” that will attract more technology talent and bolster the future workforce. Maley said he had not reviewed the specifics of the Amazon deals.
President Donald Trump and Gov. Scott Walker jointly announced the Foxconn deal at the White House last year, describing it as an economic victory.
The prominent electronics maker and Apple supplier with factories in Asia, Europe and South America said it would produce flat-screen displays in the congressional district of House Speaker Paul Ryan.
Wisconsin beat out six other states to secure the contract with billions in state income tax credits and sales tax breaks over a 15-year period.
Officials said at the time the project would generate 22,000 indirect jobs on top of the 13,000 that Foxconn promised.
The state's nonpartisan Legislative Fiscal Bureau forecast the deal wouldn't generate profits for Wisconsin until 2042, sparking criticism from liberals who felt Walker hurried the deal for a better shot at re-election.
He lost his race this month to Democrat Tony Evers, who has called the Foxconn deal a 'Hail Mary pass on the part of the governor.”
Views among residents vary, according to the latest poll from the Marquette University Law School - 46 percent of registered voters said they think the state is overpaying Foxconn, while 40 percent said the plant will deliver at least as much value as Wisconsin's investment.
And the contrast with the high-profile Amazon deals has irked some Wisconsin residents.
'It was the kind of thing where you have to sit down, catch your breath and pour a glass,” said Kelly Gallaher, a Democratic organizer who lives two miles from the future Foxconn campus.
'Comparing the two packages makes the Amazon deal look much more reasonable,” said Dennis Wiser, a school board representative and former interim mayor of Racine who identifies as politically independent.
The Amazon deals have also sparked mixed reactions.
Opponents have slammed states for handing steep discounts to one of America's largest companies, saying the new offices will drive up housing costs, snarl traffic and exacerbate inequality in areas with already deep rifts between the rich and poor.
'The Foxconn deal is one of the all-time historically bad tax giveaways by any state,” said Jeffrey Dorfman, an economics professor at the University of Georgia, 'whereas the Amazon deals look more like an average bad tax giveaway to a big businesses.”
Economist Tim Bartik, who tracks state incentive packages at the W.E. Upjohn Institute for Employment Research in Kalamzoo, Mich., said his data show that Wisconsin offered incentives 12 times higher than the national average, while New York maintained its usual course of bigger-than-normal subsidies and Virginia clinched a significantly cheaper deal than states often do.
The presence of Foxconn, though, likely will benefit workers with less advanced skills - as long as the plant's level of automation doesn't require employees with higher degrees.
'If Foxconn isn't roboticized,” he said, 'then maybe it has more jobs that are entry level and more accessible.”
Still, Joe Holt, a business professor at the University of Notre Dame in Indiana, said Wisconsin botched the negotiations.
'Wisconsin is recklessly offering more in tax incentives and subsidies on a per job basis than Virginia and Wisconsin are,” he said. 'The Amazon deals seem more a ‘win-win' while the Wisconsin deal with Foxconn seems more a ‘wimp-win.' '
‘So much less'
Mount Pleasant, a village of 26,000, is the future home of Foxconn's 20 million square-foot site.
It sits in Racine County, where the jobless rate is lower than the national figure at 3.1 percent.
Officials there have said the Foxconn factory will inject more than $1 billion into the local tax base and bring in new residents from nearby Illinois.
Racine county and Mount Pleasant are supplying roughly 3,000 acres of largely farmland for the Foxconn plant, which broke ground this summer, and building roads to support the business.
Those investments, including sewer and sidewalk updates, will cost $764 million, according to Mount Pleasant figures.
The village has said the expenses will be covered by the taxes the Foxconn plant spawns and that if the company leaves, another business could use those resources.
'We are guaranteeing that no one in the village of Mount Pleasant is going to pay $1 more of taxes because of this project,” Alan Marcuvitz, general counsel to the village, told the Milwaukee Journal-Sentinel last year.
Gallaher, spokeswoman for the local watchdog group A Better Mt. Pleasant, said she takes issue with her community funding the development of a private company's campus.
Virginia paid $796 million toward workforce cash grants and metro station updates for the promise of 25,000 Amazon jobs.
'We're giving up almost that amount and getting so much less in return,” Gallagher said.
Don Schulz, a retired Mount Pleasant farmer who voted for Walker and Trump, slammed the expense in light of the Amazon deals and the village's lack of transparency around the Foxconn factory.
'They should have been more open with the public,” he said. 'But basically we were handed it and they said, ‘here it is. This is what it's going to be.'”