Thursday, August 17, 2017

A free market?

 Foxconn agrees to invest $10 billion to construct, over six years, a facility in Wisconsin and create up to 13,000 jobs, with a reported average salary of $53,875 over a period of up to six years. The state's agreement among other things, is to provide up to $3 billion in an economic package which would include refundable tax credits and a construction sales tax exemption for Foxconn. The state of  Wisconsin would reimburse Foxconn for 15 percent of its capital expenditures for the Wisconsin plant. This credit would be capped at $1.35 billion. The second would pay for 17 percent of Foxconn’s payroll and be capped at $1.5 billion. Because the Manufacturing and Agriculture Tax Credit would leave Foxconn with little or no tax liability even before the new credits kicked in, these credits would result in cash payments to Foxconn, rather than a reduction in its tax liability. At the peak, between 2022 and 2026, about 2 percent of Wisconsin’s state revenue would go to Foxconn.

It is unclear how many jobs will actually be created by the Foxconn deal. It appears that the hiring of 3,000 workers is a firmer commitment from Foxconn. Foxconn’s president has been quoted as desiring to more fully automate his plants. It has been suggested that if Foxconn heavily automated its plant, the number of employees could be radically reduced. In this scenario, the payroll tax credits drop substantially but the capital expenditure credits continue.

Over a 15-year period Wisconsin would pay Foxconn a total of $218,516 per job created. If, instead, the number of jobs topped out at 3,000, the cost per job would rise to $546,958.

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