Sunday, July 30, 2017

Now that there is a bill, how would the Fox-con really work?

Well, the bill that describes the Fox-con deal in Wisconsin got released on late Friday afternoon, and apparently the special session to start ramming through discussing the bill begins on Tuesday. So let's take a look at the bill, and see what other goodies are a part of it.

Basically, the bill allows for the establishment of a new type of enterprize zone called an "Electronics and Information Technology Manufacturing Zone", and allows for up to $2.85 billion in tax credits that are generally determined as follows.
1. Determine the zone payroll for the taxable year for full-time employees whose annual wages are greater than the amount determined by multiplying 2,080
by 150 percent of the federal minimum wage in a tier I county or municipality or greater than $30,000 in a tier II county or municipality.

2. Multiply the amount determined under subd. 1. by 17 percent.

(bm) Filing supplemental claims. In addition to claiming the credit under par. (b), and subject to the limitations under this subsection and s. 238.396, a claimant may claim as a credit against the tax imposed under s. 71.02 or 71.08 an amount equal to 15 percent of the claimant's significant capital expenditures in the zone in the taxable year, as determined under s. 238.396 (3m).
The good part about that is that "zone payroll" that gets the 17% write-off is limited to $100,000 per employee. The bad part is that I see nothing in the language that says the credits are based on a "base year" of jobs with this Foxconn development. I don't see what that base year is, and it may well be 0, since nothing is there right now. If true, there would just has to be salaries of full-time employees and capital expenses (which is building construction, machines, etc) of some type to have things written off. And with WEDC being the ones to oversee these numbers, we have the right to be skeptical, given WEDC's awful history of tracking these things in the recent past.

Also worth noting, since corporate taxes on manufacturers are already near zero due to The Big Giveaway known as the Manufacturers and Agriculture Credit, most of this will come in the form of STRAIGHT CASH to Foxconn and others who build in the area. Not a bad deal, to be paid off by the state for hiring people and building stuff.

This part is also intriguing to me, as described by the Legislative Reference Bureau.
This bill authorizes the Department of Administration to make grants to local governmental units for costs associated with development in an electronics and information technology manufacturing zone, including costs related to
infrastructure and public safety. DOA may require a local governmental unit to match a grant in whole or in part.
Which is a good thing as a matter of policy, because it lessens the chances of local taxpayers being stuck with a huge property tax bill near the Foxconn facility. But it's not such a good thing for state taxpayers, since this is additional spending that the state would have to come up with, and with these Foxconn writeoffs.

On the flip side, the Foxconn bill allows Tax Incremental Districts (TIDs) to be extended from 20 years to 30 years under this law, meaning that local communities may be giving the property tax-free till 2048 , if the added property value doesn't match what is exempted in the TID. Which means that every other taxpayer in that community would have to pay higher property taxes to make up the difference. And we haven't seen what kind of subsidy Foxconn will get from the community they set up in...which we will find out once they actually agree on a site.

And the two bigger surprises that came out with the release of the Foxconn bill over the weekend were as follows.

The LRB indicates that this is contingent on a federal award, which would go along with Gov Walker's desire for a bailout from DC on highway funds, which was revealed earlier this month. But even if the $252 million was able to be spent on I-94 in Racine and/or Kenosha County, the bil says it would be borrowed from the General Fund, which means that there will be even fewer resources available in future years for schools, local aids, health care, and other items that the General Fund pays for.

And the most heinous parts of the bill (outside of the massive amount of corporate welfare) is this section.

And if you think the state's Department of Justice is going to make sure waterways remain clean and that others aren't screwed over by pollution on and around the Foxconn site, you shouldn't hope too hard. Why do I say that? Take a look at this tweet from the partisan GOP hack that "serves" as our Attorney General.

Nothing but corporate propaganda and GOP talking points. If that won't get you donating to Josh Kaul to get the crooked Schimel out of office next year, nothing will.

It still seems like a lot of details need to be filled in with this Fox-con, and it looks like a double-edged sword. We either see the claims of UP TO 13,000 jobs fall far short of that number, or we spend a helluva lot of money to pay off companies that add a lot of jobs and build facilities. Or worst, it could be both. Either way, this thing deserves a lot more discussion and details than I bet we will find out in the special session that is set up to jam this Fox-con through.

More to come on this one as information becomes available....and I have the time and space to go into other parts of it.


  1. Under something called a moral obligation pledge, the state can FORCE a local governmental unit (county, municipality) to match
    in whole or in part a grant the state may make to the local government.

    THAT provision shreds Schimel's goofy tweet about valuing individual freedom and opportunity above over-regulation and big government.

  2. And there is moral obligation language in the Fox-Con bill. I guess that's the flip side of the assistance, because how will the local community have enough extra money lying around to match?

    Good catch

  3. The fact that this will be a refundable tax credit which could reduce their tax burden to a negative number should be part of the discussion. Bad enough that they will likely zero out and effectively be free-loaders, but we shouldn't be paying them for the privilege.

    The State Journal did what I thought was a reasonably good job - this jumped out at me.

    "The package subsidizes Foxconn by between about $15,000 and $19,000 per job, per year, according to state figures. Bartik said his research shows the average state tax subsidy per job, per year, for large projects is about $2,500."

    Both of those points, along with giving them a virtually complete environmental pass, seem like reasonable objections. Frankly, the likely environmental impact worries me more than the money.