WSW: "Winning By Losing" Economic Development Competition

Aug 24, 2017

Wisconsin state Assembly Speaker Robin Vos joins with fellow Republicans to defend a $3 billion tax break package for electronics giant Foxconn Technology Group that the Assembly was set to pass on Thursday, Aug. 17, 2017, in Madison, Wisconsin
Credit Scott Bauer / The Associated Press

Michigan lost out on a new Foxconn plant when Wisconsin lawmakers approved a $3-billion tax break. Mackinac Center analyst Michael LaFaive says Michigan “won by losing” the battle to land the project.

LaFaive, the Senior Director of the Morey Fiscal Policy Initiative, wrote about the Foxconn deal for the Mackinac Center blog. He says the state should not offer any additional incentives for a second Foxconn project being eyed by Michigan economic development officials.

LaFaive says it could take decades for Wisconsin to recoup its investment, but he says the price tag isn’t his biggest objection. LaFaive says economic development programs based on giving tax breaks and credits to businesses are unfair to taxpayers. He says they take money from public services, and may hurt taxpayers on balance when politicians “bet on the wrong horse.”

When states consider whether to offer incentives for economic development, LaFaive says there is political pressure. But he says it’s not always the best economic choices, but rather good public relations or politics. Upjohn Institute Economist Tim Bartik completed a report earlier this year on incentives offered by states for economic development. LaFaive says he agrees with the findings of that study that states should look for the highest return on investment, and review incentive programs when they are in operation.

LaFaive says state economic development agencies have made that more difficult by not sharing information about their practices. LaFavie says politicians have tried to sell the idea of offering tax breaks and other incentives as a no-cost scenario. But he says they can’t prove that the company would not locate here without those incentives. LaFavie says research shows that most of the deals happening with taxpayer money likely would have happened anyway.