Walker Admin goes on Mke TV, J'ville paper to deceive on Fox-Con

It sure seems like the Walker Administration and other GOP hacks are getting desperate when it comes to selling the Foxconn package to voters. This weekend, Walker Administration Secretary Scott Neitzel and WEDC Chair Mark Hogan went on Mike Gousha’s show to try to promote how great Foxconn is going to be.

In the process, the Walker appointees claimed that the state’s Legislative Fiscal Bureau wasn’t giving Wisconsinites a full picture of Foxconn’s impact.

But the limits of the analysis also hide the potential of the deal, Scott Neitzel, secretary of the Department of Administration said on “UpFront.” Neitzel appeared on a segment with Mark Hogan, CEO of the Wisconsin Economic Development Corporation. Both men were involved in crafting the deal.

The breakeven analysis accounts for the 13,000 Foxconn jobs, but not for the “indirect and induced jobs across the whole state” or a “whole new high tech manufacturing ecosystem.”

“There are going to be benefits beyond what is just in that report that are very hard to quantify using historic models,” Neitzel said.

Well, let’s go to pages 15 and 16 of the LFB’s analysis of the Foxconn project, which includes assumptions on added employment from the Foxconn project. And what you will find is that LFB took the best-case scenario for the Walker Administration and other Fox-con supporters.

The estimates assume that the project will require an average annual employment of approximately 10,200 construction workers and equipment suppliers earning an average total compensation of approximately $59,600 (including benefits) per year during the four- year construction period (from 2018 through 2021). Total income for these individuals is estimated at $2.4 billion. In addition, it is assumed that nearly 6,000 indirect and induced jobs will be created during the construction period, with an average total compensation of $48,900.

It is estimated that the additional construction-period jobs would generate increased state tax revenues (primarily income and sales taxes) equal to approximately 6.3% of the additional gross wages. The total increased state taxes associated with the construction period are estimated at $186.9 million.

As noted, permanent staff at the Foxconn facility are estimated to increase from about 1,000 in the second half of 2017 to 13,000 beginning in calendar year 2021. The average annual wage for these employees is estimated at $53,875, based on a headcount distribution, by job type, provided to EY by Foxconn and median wages for each occupation from the Economic Research Institute. Total ongoing payroll at the company is projected to be $13.8 million for the remainder of this year and increase to approximately $700 million annually beginning in 2021. State tax revenues associated with the additional employees and wages are estimated to increase from about $900,000 this year to $44 million annually beginning in 2021.

And this report proves Neitzel and Hogan to be either lying or ignorant when they went on Gusha’s show and claimed the LFB didn’t look at “indirect or induced jobs.”

Indirect and induced jobs associated with the project are estimated to total 22,000 beginning in 2021, based on a multiplier of 2.7. Average annual wages for these individuals are estimated at approximately $51,000. Total ongoing wages are estimated at $1.12 billion annually, and related state taxes are estimated at $71 million per year. Smaller impacts are estimated in calendar years 2017 through 2020 as the project ramps up.

The LFB assumes $115 million in additional income tax revenues in each year of their analysis starting with 2021, and they assume that Foxconn will not lower headcount below 13,000 people in the next 20 years, even with changes in technology, consumer tasters, and productivity. That’s pretty damn lenient to the Walker Admin’s case, if you ask me.

So all the Walker Admin hacks have to promote Foxconn is vague promises of good things that are “very hard to quantify using historic models.” I have no idea what these are, as the Foxconn facility is projected to be making LCD screens for TVs and iPhones, and doesn’t seem to be involved in chip design or other technology development.

Which circles us back to this point- if there were no handouts, then manufacturing those things in Wisconsin may well be a good thing vs manufacturing them overseas. But why would we give away hundreds of millions of dollars in cash to a corporation to do it in a time when the state can’t adequate fix its roads and bridges, and has a $1 billion budget deficit looming before we even account for the Fox-con?

Let me also address another attempt to assuage concerns about the Fox-con by a Walker appointee. This one comes from Department of Revenue Secretary Rick Chandler, who claims that Wisconsinites shouldn’t worry too much if Illinois residents go across the border to get jobs at Foxconn, because of the state’s reciprocity agreement with our neighbors to the south.

In the case of Illinois, we have an income tax reciprocity agreement so that Wisconsin residents who work in Illinois do not have to file income tax returns there, and Illinois residents who work in Wisconsin do not have to file tax returns here.

Instead, they only file returns in their home state. We then calculate how much the Illinois residents would have paid in Wisconsin taxes, and how much the Wisconsin residents would have paid in Illinois taxes, and the states agree to pay those amounts to each other at the end of each tax year.

This means that Illinois residents who work in Wisconsin are paying income taxes to Wisconsin through the income tax reciprocity mechanism, even though they file their returns in Illinois. Illinois collects taxes from them and then sends us the amount they owe on their Wisconsin earnings.

Chandler accurately is describing how his works- to a point. However, if someone is still living in Illinois, they are still paying local property taxes and likely buying more items out of state than a Wisconsin resident would. And they are not likely to be affected by cuts to Wisconsin schools and services that will result from us giving away hundreds of millions of dollars a year to Foxconn.

Furthermore, as we found out when the LFB mentioned last month that Wisconsin would owe an extra $51 million in 2017-19 to Illinois under this reciprocity agreement, the taxes that Illinois resident would pay on assets or other business income would stay in Springfield, and not head up to Madison.

Bottom line, while our reciprocity payment would likely go down if Foxconn hired a sizable amount of FIBs, we wouldn’t feel as much of a benefit to our budget as we would if that job was taken by a Wisconsinite, so give Chandler a “Half true” for that article in the Janesville Gazette (of course, this assumes the Illinois resident would take a job in lower-paying “work-for-less” Wisconsin in the first place).

The bigger story is that the Walker Administration felt a need to trot out their cabinet members and other appointees to try to sell Foxconn further, which is a clear tell that the average Wisconsinite isn’t buying the Fox-con as they find out about it. If Dems are smart, they’ll come out strong against this scam as it goes through the Legislature in the coming weeks, and tie it around the necks of any Republican who dares to sign off on this pre-election corporate welfare.