Wisconsin Is Going to Lose a Bundle on the Foxconn Deal

It’s official: Wisconsin has approved a deal to bring a huge Foxconn facility to its state. The way this deal works is that Foxconn pays taxes to Wisconsin and Wisconsin provides Foxconn with refundable tax credits—that is, money that’s paid regardless of whether Foxconn has any tax liability. What this means is that it’s possible for Wisconsin to pay Foxconn more than Foxconn pays in taxes. In fact, it’s not only possible, it’s what they expect. Here’s what the deal looks like in cheese-colored chart form:

According to estimates from the Legislative Fiscal Bureau, the money Wisconsin pays to Foxconn will be higher than the combined taxes they get directly from Foxconn and from workers at the Foxconn facility. This annual deficit won’t become positive until 2033. The cumulative deficit won’t become positive until 2042. And this all assumes that Foxconn produces the 13,000 jobs it says it will. If it doesn’t, the deal will look even worse for Wisconsin.

Why enter a deal that’s certain to cost Wisconsin money in the short term and will only become profitable in the long term if Foxconn is still around in 25 years—a long time in the tech industry? Beats me. It allows Scott Walker to say that he’s a “jobs governor,” I suppose. And there’s apparently some hope that the Foxconn facility will become the hub of a new “Wisconn Valley.” This completely misunderstands both the nature of modern supply chains and the nature of the industries that made Silicon Valley a geographical hot spot.

Until now, Wisconsin’s most famous product has been cheese. In the future, state Republicans hope that Wisconsin will be famous for assembling consumer tech products. In reality, their new most famous product is old-fashioned gullibility. They got taken to the cleaners.

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