A fully built Foxconn Technology Group plant would add $51.5 billion to Wisconsin’s gross domestic product over the 15 years the state pays incentives to the company, a new analysis by the Metropolitan Milwaukee Association of Commerce concludes.
That would equate to $18 of economic impact for every $1 spent by the state, the business group, which worked to help attract Foxconn, said.
Averaged over the 15 years, the MMAC's estimate amounts to an additional $3.4 billion annually in state gross domestic product from Foxconn. That would tack another 1% onto Wisconsin's current GDP of about $313 billion.
Since the recession, the state's GDP has grown at an average of 3.6% a year.
In assessing Foxconn’s impact on Wisconsin, people should look beyond the issue of how quickly Wisconsin will recoup the tax dollars provided to the firm, MMAC President Tim Sheehy said.
While that is important, the larger effects on the state’s economy of the massive Foxconn development are sometimes forgotten, he said.
“We did the study primarily because we believe (that) in the back and forth on this project that we’ve lost sight of the tremendous economic impact that can come from this project, and that it’s been so narrowly cast” in terms of when will the new tax revenue generated by Foxconn jobs cover the state’s payments to the company, Sheehy said.
“I’m not saying that’s not an applicable viewpoint,” he said. “What I’m saying is open the aperture and look at the impact this project has on Wisconsin’s economy.”
Gross domestic product is a key measure of economic performance — similar to a company’s revenue, but for a state, region or nation. As defined by the U.S. Bureau of Economic Analysis, it represents the market value of goods and services produced by the labor and property located in a place.
Sheehy said GDP offers a picture of “the economic health or wealth” of a place.
A Foxconn-funded report last summer by consulting firm Ernst and Young estimated Foxconn would add $5.2 billion a year to Wisconsin’s GDP. Over 15 years, that would come to $78 billion — about half again as much as MMAC calculates.
Baker Tilly didn’t estimate gross domestic product generated by Foxconn, but MMAC applied the consultant’s lesser job numbers in calculating its GDP figure from the Ernst and Young number.
Sheehy called the MMAC estimate conservative. Foxconn will continue to boost Wisconsin’s GDP after the new tax revenue generated by the company repays the state incentives, he said.
In exchange for as much as $3.8 billion in state and local incentives, Foxconn has promised to invest up to $10 billion and create up to 13,000 jobs at the display panel manufacturing complex it plans for Mount Pleasant in Racine County.
The state would provide $3 billion on a pay-as-you-go basis tied to Foxconn’s hiring and capital investment. Of that total, $2.85 billion would come through tax credits that, because of the way Wisconsin treats manufacturing, essentially would be payments to the company.
The MMAC’s comparison of state incentives to Foxconn-created GDP is based on the $2.85 billion in tax credits.