Before Foxconn, manufacturers received nearly $1 billion in state aid annually

Wisconsin Policy Forum report examines industry role in Wisconsin economy

Wisconsin manufacturers received nearly $1 billion in state aid in 2016, including more than double the state incentives from the Wisconsin Economic Development Corp. than the industry’s economic output and workforce would suggest, according to a new report from the Wisconsin Policy Forum.

manufacturing activity

The report, however, also notes that manufacturers pledge more jobs than other industries for their incentives, pay above average wages and make up a significant but shrinking portion of the state’s economy.

The Wisconsin Policy Forum says the report is not an effort to resolve debates about whether manufacturers should receive state support or how much. Instead, the authors say the report is intended to examine the size and scope of the benefits the industry gets and its role in the state’s economy.

Manufacturers received an estimated $928.1 million in tax exemptions and incentives in 2016, the report found, up from $724.5 million in 2008. A large portion of the increase, $193.2 million, came from the manufacturing and agriculture income tax credit, which eliminates almost all state income tax liability for businesses in those industries.

Other state support for the industry included personal property tax exemptions, valued at $313.4 million in 2016, machinery sales tax exemptions, a $210.4 million benefit, and fuel and electricity sales tax exemptions, valued at $125.6 million.

At $74.3 million, the industry also received almost half of the $148.4 million in tax credits, grants, loans and other incentives awarded by the Wisconsin Economic Development Corp., the report found.

While the proportion of incentives received by manufacturers outstrips the industry’s proportion of economic output (around 18 percent of state GDP) and employment (around 16 percent of total workforce), the report pointed out that manufacturers made outsized commitments for capital investment and job creation and retention.

The data does not include the incentives Wisconsin awarded to Foxconn Technology Group for a $10 billion LCD manufacturing campus in Mount Pleasant. Those incentives include $2.85 billion in tax credits that could reach nearly $312 million in a single year if the company meets its hiring and investment targets.

The report also comes as lawmakers are considering a potential $70 million incentive package for Kimberly-Clark Corp. to keep a paper plant in the Fox Valley open.

Manufacturing has also seen its dominance of the Wisconsin economy decline over the last two decades. The industry’s share of the overall workforce has gone from around 21 percent in 200 down to closer to 16 percent. The state’s real GDP has increased more than 25 percent over that period, compared to roughly 11 percent in manufacturing.

While the industry’s average annual wages exceed the average paid across all industries in the state – by nearly $10,000 in 2017, the premium paid in manufacturing has been trending down. In 2001, the industry’s average wage was 126 percent of the statewide average. Last year, manufacturers paid an average of 121 percent of the state average wage, according to data from the U.S. Bureau of Labor Statistics.

Wisconsin’s manufacturing employment declines since 2000, however, have not been as severe as the country as a whole, the report found.

The authors don’t make a determination on whether the tax advantages and direct incentives are a good use of public money, but they do suggest a number of things for policy makers to consider, including:

  • The unique role manufacturers play in employing individuals without a four-year degree at higher than average wages.
  • The potential benefit of other state support including customized job training or consulting services through organizations like the Wisconsin Manufacturing Extension Partnership.
  • The potential for job gains or losses within certain sectors of the manufacturing industry.
  • State support for the industry offered by other states, particularly in the surrounding area.

“Balancing these complex and often competing questions is not just an economic exercise,” the report says. “It has been and likely will continue to be a political question.”

Read more economic data reports at the BizTracker page.

Wisconsin manufacturers received nearly $1 billion in state aid in 2016, including more than double the state incentives from the Wisconsin Economic Development Corp. than the industry’s economic output and workforce would suggest, according to a new report from the Wisconsin Policy Forum.

manufacturing activity

The report, however, also notes that manufacturers pledge more jobs than other industries for their incentives, pay above average wages and make up a significant but shrinking portion of the state’s economy.

The Wisconsin Policy Forum says the report is not an effort to resolve debates about whether manufacturers should receive state support or how much. Instead, the authors say the report is intended to examine the size and scope of the benefits the industry gets and its role in the state’s economy.

Manufacturers received an estimated $928.1 million in tax exemptions and incentives in 2016, the report found, up from $724.5 million in 2008. A large portion of the increase, $193.2 million, came from the manufacturing and agriculture income tax credit, which eliminates almost all state income tax liability for businesses in those industries.

Other state support for the industry included personal property tax exemptions, valued at $313.4 million in 2016, machinery sales tax exemptions, a $210.4 million benefit, and fuel and electricity sales tax exemptions, valued at $125.6 million.

At $74.3 million, the industry also received almost half of the $148.4 million in tax credits, grants, loans and other incentives awarded by the Wisconsin Economic Development Corp., the report found.

While the proportion of incentives received by manufacturers outstrips the industry’s proportion of economic output (around 18 percent of state GDP) and employment (around 16 percent of total workforce), the report pointed out that manufacturers made outsized commitments for capital investment and job creation and retention.

The data does not include the incentives Wisconsin awarded to Foxconn Technology Group for a $10 billion LCD manufacturing campus in Mount Pleasant. Those incentives include $2.85 billion in tax credits that could reach nearly $312 million in a single year if the company meets its hiring and investment targets.

The report also comes as lawmakers are considering a potential $70 million incentive package for Kimberly-Clark Corp. to keep a paper plant in the Fox Valley open.

Manufacturing has also seen its dominance of the Wisconsin economy decline over the last two decades. The industry’s share of the overall workforce has gone from around 21 percent in 200 down to closer to 16 percent. The state’s real GDP has increased more than 25 percent over that period, compared to roughly 11 percent in manufacturing.

While the industry’s average annual wages exceed the average paid across all industries in the state – by nearly $10,000 in 2017, the premium paid in manufacturing has been trending down. In 2001, the industry’s average wage was 126 percent of the statewide average. Last year, manufacturers paid an average of 121 percent of the state average wage, according to data from the U.S. Bureau of Labor Statistics.

Wisconsin’s manufacturing employment declines since 2000, however, have not been as severe as the country as a whole, the report found.

The authors don’t make a determination on whether the tax advantages and direct incentives are a good use of public money, but they do suggest a number of things for policy makers to consider, including:

  • The unique role manufacturers play in employing individuals without a four-year degree at higher than average wages.
  • The potential benefit of other state support including customized job training or consulting services through organizations like the Wisconsin Manufacturing Extension Partnership.
  • The potential for job gains or losses within certain sectors of the manufacturing industry.
  • State support for the industry offered by other states, particularly in the surrounding area.

“Balancing these complex and often competing questions is not just an economic exercise,” the report says. “It has been and likely will continue to be a political question.”

Read more economic data reports at the BizTracker page.

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