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posted by takyon on Tuesday August 01 2017, @11:04AM   Printer-friendly
from the self-defeating-interstate-competition-for-jobs dept.

The Progressive reports:

Wisconsin is now poised to reward Foxconn with a whopping $3 billion "incentive" package--the fourth largest "mega-deal" in U.S. history. (That figure works out to an incredible $231,000 per job, and does not include the local subsidies that are invariably a part of such deals.) The bulk of this subsidy would be paid out in cash.[1]

[...] Wisconsin is jumping into the self-defeating interstate competition for jobs, in which U.S. states spend a collective $110 billion[2] on tax breaks and other sweeteners reserved mostly for the largest and most profitable companies like Foxconn, which raked in $2.26 billion in profits last year.

[1] Paywall after x visits per month.
[2] Link in TFA is just a search: http://america.aljazeera.com/search.html?q=%24110+billion.


Original Submission

Related Stories

China Trade War Could Push iPhone Contractor Foxconn to Build in Mexico 25 comments

https://arstechnica.com/tech-policy/2020/08/china-trade-war-could-push-iphone-contractor-foxconn-to-build-in-mexico/

For years, iPhones (or their boxes) have said that they were "designed by Apple in California. Assembled in China." But thanks to an escalating trade war between the US and China, that might not be true in the coming years. Reuters reports that two of Apple's biggest manufacturing contractors, Foxconn and Pegatron, are working to expand their facilities in Mexico with an eye toward eventually building iPhones there.

[...] This isn't Foxconn's only effort to diversify away from China. Last year, Foxconn announced plans to begin manufacturing iPhones in India, and the company is now manufacturing the iPhone SE there.

Sources told Reuters that Taiwan-based iPhone contractor Pegatron is also considering a shift to Mexico, but few details about its plans are known.

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  • (Score: 4, Funny) by kaszz on Tuesday August 01 2017, @11:35AM (11 children)

    by kaszz (4211) on Tuesday August 01 2017, @11:35AM (#547594) Journal

    If the initial price is high. The deal should be that the tax income in the future will pay it back. Is there any prognosis that indicate that to a likely future? and by how much? above inflation?

    Fox-conn ;)

    • (Score: 3, Informative) by GreatAuntAnesthesia on Tuesday August 01 2017, @01:24PM (1 child)

      by GreatAuntAnesthesia (3275) on Tuesday August 01 2017, @01:24PM (#547623) Journal

      Is there any prognosis that indicate that to a likely future?

      Signs point to no: "The company doesn’t have a great track record of keeping its job-creation promises" [theguardian.com]

      • (Score: 2) by kaszz on Tuesday August 01 2017, @01:45PM

        by kaszz (4211) on Tuesday August 01 2017, @01:45PM (#547641) Journal

        Few jobs. But maybe the tax revenue will make it worthwhile? or spin-of?

    • (Score: 2) by DannyB on Tuesday August 01 2017, @01:26PM (3 children)

      by DannyB (5839) Subscriber Badge on Tuesday August 01 2017, @01:26PM (#547624) Journal

      The deal should be that the tax income in the future will pay it back.

      LOL. Almost made me spit out my Diet Coke®.

      --
      People today are educated enough to repeat what they are taught but not to question what they are taught.
      • (Score: 2) by deadstick on Tuesday August 01 2017, @01:27PM

        by deadstick (5110) on Tuesday August 01 2017, @01:27PM (#547625)

        And pay for the border wall too...

      • (Score: 2) by kaszz on Tuesday August 01 2017, @01:37PM (1 child)

        by kaszz (4211) on Tuesday August 01 2017, @01:37PM (#547635) Journal

        Why give donations and tax breaks now if it won't be covered by future tax payments?
        Oh well I'll guess the taxpayers has to pay it all ;)

        • (Score: 5, Insightful) by WillR on Tuesday August 01 2017, @03:28PM

          by WillR (2012) on Tuesday August 01 2017, @03:28PM (#547678)
          Because "I brought X,000 jobs to the region" is a great campaign sound bite to show how I am the best at business and make the hugest deals, and the inevitable "most of the promised jobs were either never filled, or were automated away within 5 years, and they closed the plant a year after the tax subsidies expired" analysis coming in 10 years is a bunch of boring science words for loser dorks.
    • (Score: 2) by jcross on Tuesday August 01 2017, @01:32PM (1 child)

      by jcross (4009) on Tuesday August 01 2017, @01:32PM (#547630)

      No, but in America this is how we have to disguise handouts to our citizens.

      • (Score: 2) by kaszz on Tuesday August 01 2017, @01:53PM

        by kaszz (4211) on Tuesday August 01 2017, @01:53PM (#547645) Journal

        So Tesla is really just an excuse to set up jobs for people that noone really wants? fake jobs?

    • (Score: 2) by Grishnakh on Tuesday August 01 2017, @01:56PM (2 children)

      by Grishnakh (2831) on Tuesday August 01 2017, @01:56PM (#547647)

      At that price, it seems very unlikely. Most income tax you pay is Federal, so the state isn't going to see a dime of that (versus not making this deal and letting the plant go to some other state); state income tax is a fraction of federal. So it'll take probably a couple decades to repay just in state income taxes, not counting inflation, time value of money, etc. You can also claim that they'll make more in network effects (bringing these jobs will also bring more support businesses, like coffee shops or restaurants that employees go to, and the jobs those places support), but still it seems like it'll take some time to realize a gain there. And then if Foxconn pulls out after 4 years for someplace cheaper, they'll be left without that money, plus a bunch of support businesses and jobs left hanging and low-wage workers now needing assistance (who didn't live there before).

      • (Score: 1, Insightful) by Anonymous Coward on Tuesday August 01 2017, @02:28PM

        by Anonymous Coward on Tuesday August 01 2017, @02:28PM (#547655)

        Foxconn pulls out after 4 years for someplace cheaper,

        In 4 years they will mooch for more. They will complain that to compete they need to modernize which costs money. Of course, if they got some advance breaks that would guarantee jobs, jobs, jobs. This is essentially how businesses get free labour. Get government to pat for the "jubs" while they reap the benefit. Cheaper than slavery.

      • (Score: 0) by Anonymous Coward on Tuesday August 01 2017, @04:30PM

        by Anonymous Coward on Tuesday August 01 2017, @04:30PM (#547698)

        And then if Foxconn pulls out after 4 years for someplace cheaper, they'll be left without that money, plus a bunch of support businesses and jobs left hanging and low-wage workers now needing assistance (who didn't live there before).

        It really depends where they put the factory. If they put this in the middle of nowhere, yes, that's probably true.

        Down around the old factories though?

        Those people have been left hanging before, and those support businesses have already died/hibernated once as a result. Going through the cycle once more isn't going to be much worse than the current state of affairs. Worst case scenario is you end up exactly where you were, at least at the local level.

  • (Score: 4, Insightful) by LoRdTAW on Tuesday August 01 2017, @11:51AM (9 children)

    by LoRdTAW (3755) on Tuesday August 01 2017, @11:51AM (#547597) Journal

    I assume the American facility will not have suicide nets or prison like domistiles.

    • (Score: 0) by Anonymous Coward on Tuesday August 01 2017, @12:25PM (2 children)

      by Anonymous Coward on Tuesday August 01 2017, @12:25PM (#547606)

      That is an unwarranted assumption.

      • (Score: 4, Funny) by Runaway1956 on Tuesday August 01 2017, @01:33PM

        by Runaway1956 (2926) Subscriber Badge on Tuesday August 01 2017, @01:33PM (#547631) Journal

        We can get a warrant though. In fact, we have some blanks in the trunk of the car, just hold on a second.

      • (Score: 0) by Anonymous Coward on Tuesday August 01 2017, @05:39PM

        by Anonymous Coward on Tuesday August 01 2017, @05:39PM (#547711)

        Indeed, in america the company will probably be better served with bullet proof glass.

    • (Score: 0) by Anonymous Coward on Tuesday August 01 2017, @12:55PM (1 child)

      by Anonymous Coward on Tuesday August 01 2017, @12:55PM (#547615)

      No they will use prisons so then they get cheap labor, tho it might be a step to making people not want to go back to prison cause they don't want to work for them.

      I mean think about it the prison gets to use them as cheap labor, the state pays the prison to make iphone and people buy the iphones, they get paid 2x as much and increase the bottom line its a win-win

      • (Score: 2) by looorg on Tuesday August 01 2017, @01:08PM

        by looorg (578) on Tuesday August 01 2017, @01:08PM (#547620)

        Soldering for Foxxconn might still be a better work experience for prisoners then milking goats (was in the news here a week or so ago). That is if it was prisoners that was working in the factory. But I don't think it was.

    • (Score: 0) by Anonymous Coward on Tuesday August 01 2017, @01:14PM

      by Anonymous Coward on Tuesday August 01 2017, @01:14PM (#547621)

      In America we use death by cop instead of death by drop :)

    • (Score: 2) by DannyB on Tuesday August 01 2017, @01:28PM

      by DannyB (5839) Subscriber Badge on Tuesday August 01 2017, @01:28PM (#547626) Journal

      I assume the American facility will not have suicide nets or prison like domistiles.

      OSHA will require much improved safety nets to ensure worker safety.

      Once it takes hold, all US workplaces could have suicide prevention nets.

      --
      People today are educated enough to repeat what they are taught but not to question what they are taught.
    • (Score: 1) by fustakrakich on Tuesday August 01 2017, @04:15PM (1 child)

      by fustakrakich (6150) on Tuesday August 01 2017, @04:15PM (#547687) Journal

      Don't know if all that is necessary for a room full of robots that are bolted to the floor.

      --
      La politica e i criminali sono la stessa cosa..
      • (Score: 2) by JoeMerchant on Tuesday August 01 2017, @04:22PM

        by JoeMerchant (3937) on Tuesday August 01 2017, @04:22PM (#547690)

        As long as the robots and their maintainers pay taxes, that's o.k. - working citizens need expensive infrastructure, generally more expensive than the taxes they pay themselves.

        --
        🌻🌻 [google.com]
  • (Score: 2) by Runaway1956 on Tuesday August 01 2017, @01:35PM (2 children)

    by Runaway1956 (2926) Subscriber Badge on Tuesday August 01 2017, @01:35PM (#547633) Journal

    The state could subsidize some much smaller corporation for far less, and probably be raped less thoroughly. Hell, for this price, Wisconsin could hire a few dozen experts, and go into business for themselves. But, there's a sucker born every minute, is what I hear.

    • (Score: 3, Interesting) by schad on Tuesday August 01 2017, @03:57PM

      by schad (2398) on Tuesday August 01 2017, @03:57PM (#547684)

      The state could subsidize some much smaller corporation for far less, and probably be raped less thoroughly.

      Or you could stop subsidizing anybody at all, and instead set your tax code (or whatever else) in such a way that it always encourages growth.

      I mean, if the only way you can attract businesses is by telling them they don't have to pay a dollar in taxes for 15 years, then maybe you should instead lower your corporate tax rate. Possibly set it to zero and raise other taxes instead to make up for it. Tada! Now Foxconn and your local businesses -- the ones that actually improve the lives of local citizens instead of Chinese billionaires -- can benefit!

      Politicians don't like it because it removes the opportunity for graft, though. How many Wisconsin state politicians were wined and dined by Foxconn as part of the lobbying process?

    • (Score: 3, Interesting) by Anonymous Coward on Tuesday August 01 2017, @06:33PM

      by Anonymous Coward on Tuesday August 01 2017, @06:33PM (#547722)

      Amen.
      ...and make that a startup.
      ...and make that a worker-owned cooperative.
      (They've been doing this since 1985 in Italy.) [google.com]

      -- OriginalOwner_ [soylentnews.org]

  • (Score: 5, Informative) by bradley13 on Tuesday August 01 2017, @01:53PM (3 children)

    by bradley13 (3053) on Tuesday August 01 2017, @01:53PM (#547646) Homepage Journal

    Too often, companies like this stay until the tax breaks are about to expire, then threaten to leave if they aren't extended. It's a bidding war that states should never enter, because the tax breaks essentially never match the cost of the subsidies. And paying actual, hard cash to a company? That's just nuts.

    Quick back-of-the-envelope: The plant "could" employ up to 13,000 people. Let's say 10,000, with salaries averaging $50,000, of which they will pay maybe 20% in taxes (income tax, sales tax, whatever). So that's $100 million in taxes per year. To make up for a $3 billion subsidy, that plant needs to remain in place, with no additional subsidies, for 30 years.

    One can argue with the figures, but they need to improve by nearly an order of magnitude for this to make any sense.

    --
    Everyone is somebody else's weirdo.
    • (Score: 5, Insightful) by MrGuy on Tuesday August 01 2017, @03:07PM

      by MrGuy (1007) on Tuesday August 01 2017, @03:07PM (#547666)

      It's about what's in the POLITICIAN's best interest. That's why this scam works, and why it's common.

      The politicians who sign off on the initial deal can claim a win. We created jobs! We're putting people to work! Yes, we gave them some subsidies that reduce the benefit of the deal, but look how if we amortize those over the next 10 years on a set of assumptions that the jobs continue forever and we never pay the company subsidies again ever, then look how we came out $50 million ahead! You're welcome, Wisconsin! We're great job creators!

      Of course, if the jobs go away at the end of the subsidy period, or if they have to give back all $50 million (and then some) in new subsidies to keep the jobs, then the state is actually worse off, because all the money they supposedly "created" is wiped out, and they can often wind up in the red overall, because all the benefits that made those subsidies worth it are in the tail of the economic model.

      But a.) nobody really follows up on this over the long term (the press has a notoriously short attention span), and b.) even if it does, nobody blames the politicians responsible. First, it's 10 years later and they're not necessarily even in the same job anymore. Second, if anyone gets blamed, it will be "that greedy company!" for holding jobs hostage (even though that behavior should have been predicted). And, third, even if they trace the blame to the original politicians, they can always blame "the current administration" for bungling the deal.

      States frequently lose these deals. But they're absolutely a clean win for the politicians responsible. They get a boost as a "job creator," and are almost entirely insulated from blame when the forecasted profits fail to materialize.

    • (Score: 1, Insightful) by Anonymous Coward on Tuesday August 01 2017, @03:50PM

      by Anonymous Coward on Tuesday August 01 2017, @03:50PM (#547682)

      One thing you have to understand about the upper midwest (and especially Walker's Wisconsin) is that this is how social programs are done. State jobs/spending are currently taboo in Wisconsin, so any help needs to be indirect.

      The plant itself is an estimated $10b, or $7b when you take away the incentive. That's a lot of construction work and materials. How much of that stays in the state and gets paid to Wisconsin workers/vendors I'm not sure, but it's not insignificant.

      After the construction is done, and using your estimates, Foxconn is dumping somewhere between $400-500m into the local economy every year. That's better than $0. Presumably they won't dump $10b into a plant and then up and leave immediately, so you've got maybe 3-10 years of this.

      So, no, it does make sense. The goal isn't necessarily to break even with regards to Foxconn, but instead to move money around within the state and make it do something useful. And it is largely just money - the tax incentives aren't that large.

    • (Score: 0) by Anonymous Coward on Wednesday August 02 2017, @03:24AM

      by Anonymous Coward on Wednesday August 02 2017, @03:24AM (#547832)
      Way to be short sighted.

      Those people will be putting that money into their local economy.
      That money will get taxed over and over as it moves along. Money that would not exist if not for that job.

      You say 30 years? I say we'll reach the break even point on the large scale within 3-5 years.
      Because these are workers. Not rich people. Their money does not sit around doing nothing. They spend it!
  • (Score: 0) by Anonymous Coward on Tuesday August 01 2017, @03:18PM (1 child)

    by Anonymous Coward on Tuesday August 01 2017, @03:18PM (#547673)

    Same as giving tax breaks and money so hollywood will make a movie in your backyard. It's a losing game for everyone but the corporations that get free money.

    • (Score: 2) by PartTimeZombie on Wednesday August 02 2017, @01:06AM

      by PartTimeZombie (4827) on Wednesday August 02 2017, @01:06AM (#547809)

      Same as giving tax breaks and money so hollywood will make a movie in your backyard...

      I live in New Zealand and remember clearly how Warners strong armed our government into giving up $50 million of my money and screwing the workers with the threat to make The Hobbit movies outside of New Zealand.

      Hugely dodgy dealings on all sides [wikipedia.org]

      The worst thing about it was the way the actual workers lobbied to have their own rights stripped away. Idiots.

  • (Score: 1) by i286NiNJA on Tuesday August 01 2017, @04:29PM (2 children)

    by i286NiNJA (2768) on Tuesday August 01 2017, @04:29PM (#547697)

    Perhaps the idea is that once they get a few factories pumping out electronics other companies will follow suit knowing there is a pool of small electronics workers there and foxxcon has already weeded out the unstable suicide risks.

    • (Score: 0) by Anonymous Coward on Tuesday August 01 2017, @08:16PM (1 child)

      by Anonymous Coward on Tuesday August 01 2017, @08:16PM (#547741)

      "there is a pool of small electronics workers there"

      Surfs or elves?

      • (Score: 1) by i286NiNJA on Wednesday August 02 2017, @04:52PM

        by i286NiNJA (2768) on Wednesday August 02 2017, @04:52PM (#547997)

        Lol you misspelled smurfs but the way things are going I think they probably want a bunch of serfs.

        Preferably tiny malnourished stupid epsilon minus semi moron serfs.

  • (Score: 0) by Anonymous Coward on Tuesday August 01 2017, @09:35PM

    by Anonymous Coward on Tuesday August 01 2017, @09:35PM (#547759)

    Considering the mentally challenged human garbage in control of this state's government, I would say "most definitely" we will get Foxconned. Our governor, senate, and assembly is full of functionally retarded hypocrites.

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