The Governor of Wisconsin, Scott Walker (left), President Donald Trump and Foxconn chairman Terry Gou are taking part in a groundbreaking ceremony at Foxconn's new site in Mount Pleasant, Wis., June 28, 2018. (Kevin Lamarque / Reuters )
Stop the favoritism and treat all companies the same.
Confusion prevails in Wisconsin, where Foxconn Technology Group sends mixed signals about whether it will ever build a promising factory.
A few weeks ago the company said that higher labor and production costs made the factory untenable. Within a few days it turned around and said it would build the plant. Although the company will lose some tax incentives if it does not deliver, and in fact already has a failure to achieve goals, state and local leaders are understandably discouraged by recent developments after bidding $ 4 billion in corporate welfare.
In the meantime, Electrolux announced last week that it will stop production at its Memphis plant, which opened in 2014 with $ 150 million in financial incentives from the state, city and Shelby County. Memphis mayor Jim Strickland called the news & # 39; disappointing & # 39; and promised to "defend our investment & # 39 ;. Good luck with it.
Everywhere in the country, cities and states spend billions every year trying to entice new businesses to set up a store or persuade existing ones to stay. They do the same with professional teams.
But even with a mountain of academic evidence showing that such corporate welfare schemes have little to no overall positive economic impact, politicians – Republicans, Democrats and independents – continue to fall for any bizarre promise of more jobs and an economic boost for their communities.
In most cases, the location choices of companies are based on issues such as the availability of qualified labor, general business climate and quality of life. Even in cases where a company receives company well-being, the incentives make up a quarter of the time difference.
More often, corporate welfare is the icing on the cake for a decision that is already ingrained. In 2016, Northrop Grumman won millions of taxpayers in Maryland. Lawmakers expressed concern that the company – which was already located in the state – could be lured away by subsidies from other states.
This happened only a few months after a company official told the legislators that we are not going anywhere.
In New Jersey, the state inspector has just released a devastating report on the experiences of that state trying to generate economic growth through corporate subsidies, saying that internal controls for monitoring those projects "are missing or did not exist." The audit sampled 48 projects that supposedly met their targets, but found that 20 percent of job claims could not be confirmed. And it hit the government not to evaluate whether projects gave the state economic benefit.
These are just the problems we can all see. There are also hidden problems: less money for critical priorities such as education and police; companies that leave the state when the stimuli dry up; the jobs and economic activity that do not occur when other parts of the community are ignored; higher taxes for other companies; the jobs that have not been created at the competitors of the subsidized company; and the innovations that did not take place because the agile start-up could not get off the ground in the face of the government-subsidized company giant.
In the end, we all know who pays the bill for handouts and tax benefits – taxpayers, employees and consumers.
Instead of throwing taxpayers to corporations, legislators should work to make their states and cities an attractive place to live, work and do business. They could do so by minimizing taxes and regulations, improving their schools by increasing the choice for families and not making debts.
But it is foolish for states and cities to believe that they can build a solid, growing economy, a corporate giveaway funded by the taxpayers at a time. It is a colossal waste of money. It is time to stop the favoritism and to treat all companies the same.