- And now for a closer look at the price tag that could come
with the Foxconn deal.
A study released Thursday by the Wisconsin Budget Project shows
it's possible Wisconsin may never break even on the deal.
Jon Peacock is the lead researcher with the project and
joins us to explain.
Thanks for being here. - Thanks for having me on.
- So the best case scenario for the Foxconn deal according to
reports is that it breaks even in 25 years.
What is the worst case?
- Well, the worst case scenario is it doesn't break even ever
because Foxconn could conceivably leave the state
within 10 or 20 years after getting tax credits or really
cash payments from the state of about $200 million a year for 10
or 20 years.
And the possibility of their leaving in that period of time
is very real for a manufacturer of technology devices like this
that could be obsolete five, ten years from now.
- So are people talking about that?
- I think that certainly came up in the debate, but I don't
think it's gotten as much attention as it should.
Both with respect to the risk for state taxpayers and the
local taxpayers who will have to incur
huge infrastructure spending costs.
- Another thing, you looked at this
from kind of many different angles.
You have the best case.
You have the worst case.
And then you have kind of these cases in between.
What other numbers did you run?
- We looked at a couple less rosy scenarios where Foxconn--
In one scenario, we analyzed that they would hire 6500 jobs,
which I think would be a boon to that area.
And that there would be ancillary employment or indirect
employment of 16,500, so a total of 23,000 new jobs.
And then a second scenario where there would be 3,000, which is
at the bottom end of the range the governor's been talking
about and 11,000 new jobs, indirect jobs.
- There's also this matter of automation or robotics that I
understand from experts Foxconn is really kind of all about.
How would that affect tax revenue
and this break-even point?
- We were essentially assuming in our two scenarios quite a bit
of automation or use of robotics.
In the sort of basic best case scenario and the other two that
we looked at, we assumed that they would spend at least $9
billion on capital investments and qualify for the maximum
credits on that side.
But we just varied the number of people that they employed.
So we were assuming higher degrees of automation.
- So that's where those kinds of scenarios came from, from
13,000 to 6500 to 3,000.
But as you said, in the near term, Foxconn is going to build
this $10 billion plant in whatever location it decides to
site in.
And that results in this 16,000 construction or related jobs and
nearly $200 million in state taxes then.
So regardless of the numbers created, at least there's that
constant, right?
- Well, not necessarily, no.
We did assume in each of our scenarios,
we said we'll give you that.
Let's just assume that.
But actually we did that for the sake of simplifying things
and focusing just on the changes in the employment.
But a key thing to understand is that the way this deal is
structured, there are two credits.
One where they get 17% of their payroll reimbursed by the state
and the other where they get 15% of their capital investment.
And kind of the more negative scenarios for state taxpayers
are that they qualify for the maximum on the capital side by
going heavily into robotics and don't have so many employees, in
which case the state's subsidy per new employee could be
upwards of $570,000 a year.
- Which is obviously huge.
And then there's the matter of will these employees actually
all be from Wisconsin, because it's right there on the border.
- Sure.
- And so what implication does that have?
- Well, there's been a lot of confusion about that.
And I'm assuming many of them will be in Illinois.
But the Secretary of the Department of Revenue says we'll
be able to collect income tax revenue for Illinois residents
who are commuting into Wisconsin.
So we assumed he is right when we did the modeling.
On the other hand, especially for the more automated
scenarios, most of the new jobs are going to be with suppliers.
And many of them will be in Illinois.
And those workers at those supply companies, their income
will be taxed in Illinois.
And so we assumed pretty conservatively that 5% to 10% of
the new tax revenue would end up in Illinois tax coffers,
not Wisconsin's.
And that lengthens the payback period.
- Well, thank you for looking at the details.
Jon Peacock.
- Thanks for having me.