Pricier iPhones, poorer schools? State governments fall over Apple, Foxconn with tax relief for jobs
The rebirth of blue collar labor has been an economic focus point for the Trump administration. The president has been pressuring companies to create or keep jobs within the United States, but has achieved mixed results with his tactics so far. Still, big corporations look to rake in potential efficiencies, big tax breaks and, the ultimate goal, tax reform in the next few years, so some players have risked big bids early in this race.
Those players have mostly been the so-called “Rust Belt” states in the midwest and mid-Atlantic coast that were once filled with churning factories but have since been decimated by their emptied footprints. It is those states that see much to gain under this presidency and from the right clients.
Iowa inked an agreement with Apple yesterday to shelve $208 million in taxes for Apple in return for building two data centers and sustaining a minimum of 50 jobs in the Des Moines suburb of Waukee. Apple would join Google, Facebook and Microsoft in building data centers in the state — all four firms were offered tax incentives and were attracted by its strong renewables-fueled power grid.
The actual breakdown of the levy relief puts most of the burden on Waukee, dropping $188 million in property taxes while the Iowa Economic Development Authority will refund $19.6 million in state sales taxes. Construction costs for the server buildings are quoted at $1.4 billion. Local runoff impacts — food, lodging, etc. — are unknown.
The state has amassed an estimated $350 million budget shortfall this fiscal year. Major austerity measures have either been debated or executed on healthcare, schools and other sectors. Critics of the deal have accused Gov. Kim Reynolds of adding a loss onto mounting losses. Proponents say that Iowa’s stature as a tech haven will lead to more jobs coming into the state and a better economy should tail along.
Jobs will be a key factor when it comes to Foxconn’s new display production factories in southern Wisconsin — specifically, where will the jobholders commute in from? The largest contract assembler of iPhones is scouting multiple sites, all of which could draw workers just 20 minutes down south in Illinois. While Illinois might not be the scene of action, the state has plenty of people power to provide. In the bistate region, the number of employees that commuted across to Wisconsin doubled the number that jumped to Illinois for work.
It leaves Wisconsin and its prospective labor force in the vulnerable position of giving away up to half of the 23,000-plus potential jobs to their neighbors, though Governor Scott Walker publicly believes that his state will receive 90 percent of the positions. The legislature is quietly moving a bill that would relieve Foxconn of $3 billion in taxes with the stipulation that the company put Wisconsin CVs above out-of-state resumes when staffing. Considering that the state’s transportation fund is short by $1 billion, it will be a hard press to get a biennial budget set up and signed by the end of September.
On the campaign trail, when Donald Trump decided to call Apple out for not building their “damn computers” in the United States, the speculation of a $1,000 iPhone 8 didn’t even cross much of the tech media cognoscenti — perhaps it was just too far away to visualize. As estimates started coming in of how much an iPhone would cost with US labor under current regulations, that chatter grew louder. At this point, analysts and the media have pretty much conferred on that four-digit price point completely regardless of any notion that domestic hands will touch a Foxconn assembly line. But there’s plenty of time to begin blueprinting iPhone assembly lines in states like West Virginia, Ohio or even Oklahoma.
If business gets what it wants from a Republican government, it will be able to satisfy nationalists for a small cost and score huge policy victories on taxes and global operations. States, however, may still battle each other for the few (human) jobs that could be created in this regime’s wake with incentive packages that will dent their balance sheets and force funding cuts to institutions that citizens rely on or an array of tax hikes.
Perhaps that iPhone 9 will cost more than you think.