Some members of the press have bemoaned the fact that Wisconsin and not Illinois was chosen by the Taiwanese electronic supplier Foxconn as the location of their new manufacturing plant. Some have insinuated that this is just additional proof of the incompetence of our political leadership. Wisconsin Governor Scott Walker has described the project as "transformational." According to Walker, the Foxconn jobs are expected to have an annual salary of at least $53,000 plus benefits.
Let's look at the facts. Wisconsin's incentive package consisted of $1.5B in state income tax credits for job creation, $1.35B in state income tax breaks for capital investment, and $150M for sales tax exemption. In addition, the state would exempt the company from a number of environmental regulations, and would borrow $252M to rebuild Interstate 94 near the plant site. In exchange, Foxconn plans to build a $10B factory in Wisconsin for the production of flat screens for televisions and other consumer electronics. At this time, there are only estimates as to how many jobs would be created.
According to Timothy J. Bartik, a senior economist at the W.E. Upjohn Institute for Employment, "This is a very costly package, and I am skeptical that the benefits justify such big incentives. … This is well beyond the typical deal."
In a recent study, the nonpartisan Legislative Fiscal Bureau estimated that the cost of tax credits would exceed potential increased tax revenue by $1.04B at the end of fiscal year 2032-33. After that year, payments to Foxconn would end and increased tax collection would bring in about $115M annually. At that rate, the break-even point would come during the 2042-43 fiscal year.
My question is what would happen to Wisconsin's expected economic benefits if Foxconn decided to decamp to another state in 2033 or shortly thereafter? Corporations have proven to be adept at playing off one state against another in order to secure a tax advantage.
Because of all of the above, I question the notion that in this situation Illinois lost an economic benefit and Wisconsin gained one.
Answer Book 2017
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