Category: Wisconsin business

News from a former employer

Back in my business magazine days, I went to a business journalism conference at the Journal Communications headquarters in downtown Milwaukee.

In my 10 years of working for the Journal empire, it was the only chance I got to see the headquarters. (Though Mrs. Presteblog purchased a Journal Communications shirt I still own, even though it’s severely faded and two sizes too large.) I got to see Radio City, home of WTMJ and WKTI radio and WTMJ-TV, several times thanks to my appearances on “Sunday Insight with Charlie Sykes.”

Steve makes a point.

I’ve written here before about how working for Journal Communications was better in its employee-ownership days than in its publicly traded days. (The Sykes show came in the latter period; for some inexplicable reason the first time I was invited, in the late 1990s, my boss — who later proved the maxim that most people leave an employer not because of their pay, but because of their boss — said being on Sykes’ show would be a bad idea. A decade later upon my return, that boss thought it would be a good idea.) For one thing, I got very discounted long distance phone service (remember those days?) and discounted subscription rates to the Milwaukee Sentinel and then the Milwaukee Journal Sentinel.

Steve is wary about something. This was the show where, beforehand, Mikel Holt looked at what I was wearing and announced that I “dressed black.” I took that as a compliment, though I wasn’t, and still am not, sure what he specifically was referring to.

George Mitchell writes:

While Milwaukee Journal Sentinel Editor George Stanley likely does not read every story that appears, he surely reviewed Thursday’s piece by Tom Daykin on the relocation of the paper away from its Fourth & State headquarters.

That story included this:

The company’s roughly 260 employees will be moving to the 330 Kilbourn office complex, 330 E. Kilbourn Ave., said Andy Fisher, the Journal Sentinel’s chief business executive.

The new offices will help the Journal Sentinel better retain and attract employees, Fisher said Thursday.

“It’s a more modern facility that I think people will feel a lot more comfortable in,” he said. “It’ll have a really fresh feel.”

That rationale, of course, is preposterous. It’s the kind of spin that would be filleted by the likes of Dan Bice.

Not long ago the idea of the Journal Sentinel leaving a headquarters built almost a century ago would have been unthinkable. It is a dispiriting and symbolic development, particularly for those who can recall when the paper and its predecessors were “must read” documents in the morning (and afternoon).

When I entered the UW-Madison Journalism School in the mid-60s the daily Milwaukee Journal had a circulation of about 375,000. At the time of the 1995 merger with the Sentinel the daily circulation of the new paper was about 325,000. A year ago (February 2018) it was a meager 82,000 — a 71 per cent decline from the merger’s debut edition.

The precipitous decline mirrors a national trend. According to the authoritative Pew Research Center:

U.S. newspaper circulation reached its lowest level since 1940, the first year with available data. Total daily circulation (print and digital combined) was an estimated 28.6 million for weekday and 30.8 million for Sunday in 2018. Those numbers were down eight percent and nine percent, respectively, from the previous year, according to the Center’s analysis of Alliance for Audited Media data. Both figures are now below their lowest recorded levels, though weekday circulation first passed this threshold in 2013.

Specific Pew research on the Milwaukee market is sobering for newspaper adherents. A minuscule 13 percent of adults report they “prefer to get their local news” from print media. The numbers are even worse when considering responses to an open-ended question of where adults “most often” get their news. Only ten percent cited the Journal Sentinel. By comparison, more than four times as many cited the local affiliates of Fox, NBC, and ABC.

The implications of this seismic development, locally and nationally, are wide-ranging. TV news and social media can’t hold a candle to the potential of an economically solid newspaper staff when it comes to comprehensive news coverage and investigative reporting.

My own preoccupation involves how the decline of the Journal Sentinel (and other papers) will affect public policy. What do local officials, legislators, and their staffs now rely most on for information? Do “special interests” now call more of the shots?

What hasn’t changed is the enormous impact our elected officials can have.  They decide who does and doesn’t have educational choice. They decide whether the transportation system is maintained and strengthened. They set criminal justice policy.

Among the myriad groups and associations that seek to influence these issues, all must now have elaborate websites and communication strategies that move their messages to the top of Google searches. This in turn shines a light on the undisputed left-leaning bias of Google, Facebook, Twitter and their ilk.

Yesterday’s story is hard to find on the Journal Sentinel website today. That in no way diminishes the significance. The symbolic nature of vacating the paper’s headquarters for a nondescript private office building is a bummer.

One other piece of interesting news: The Journal Sentinel (now part of Gannett, which may be in the process of being purchased by a company owned by one of the Milwaukee Bucks owners) is moving into the same building as the Wisconsin Institute for Law and Liberty. Maybe WILL can arrange to run into Journal Sentinel reporters and editorial writers and set their minds right.

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Trump’s tariffs are so big …

Brett Arends wrote this last week:

I’m used to partisan, inaccurate drivel from all sides these days, but the media’s coverage of President Trump’s tariffs and the so-called “trade war” takes some kind of cake.

There’s no serious doubt that some in the media would absolutely love to tank the stock market. They figure that would hurt Trump’s re-election chances in 2020. Monday’s stock market slump, which saw the Dow Jones Industrial Average DJIA, -1.41% tumble 2.4% and the Nasdaq Composite 3.4%, looked just like what the doctor ordered.

I write this, incidentally, as someone who is no fan of the president. But I remember when politics was supposed to stop at the water’s edge.

And, anyway, facts are facts. Most of what the public is being told about these tariffs is either misleading or a downright lie.

I’ve been following the coverage all weekend with my jaw on the floor.

Yes, tariffs are “costs.” But they do not somehow destroy our money. They do not take our hard-earned dollars and burn them in a big pile. Tariffs are simply federal taxes. That’s it. The extra costs paid by importers, and consumers, goes to Uncle Sam, to distribute as he sees fit, including, for example, on Obamacare subsidies.

It wasn’t long ago the media was complaining because Trump was cutting taxes. Now it’s complaining he’s raising them. Confused? Me too.

And the amounts involved are trivial. Chicken feed.

President Trump just hiked tariffs from 10% to 25% on about $200 billion in Chinese imports. In other words, he just raised taxes by … $30 billion a year.

Oh, no!

The total amount we all paid in taxes last year — federal, state and local — was $5.51 trillion. This tax increase that has everyone’s panties in a twist is a rounding error.

Meanwhile, the total value wiped off U.S. stocks during Monday’s panic was about $700 billion. More than 20 years’ worth of the new tariffs.

Even if Trump slapped 25% taxes on all Chinese imports, it would come to a tax hike of … $135 billion a year. U.S. gross domestic product (GDP) last year: $20.5 trillion.

So even this supposedly scary “escalation” of this “tariff war” would, er, raise our total tax bill from 26.9% of GDP all the way to 27.5% of GDP.

Oh, and isn’t it interesting to see some people’s priorities? Apparently the most shocking part of this trivial tax hike is that it might raise the price of new Apple iPhones.

Last I checked, these were luxury items, right?

Meanwhile, the trade spat seems to be bringing down food prices. China is going to take less of our farm products. So wheat prices are down 20% since the start of the year. Soybeans are at 10-year lows.

Good for consumers, right?

No, no, of course not! Silly you. This is also bad news … for farmers!

And all this ignores the much bigger picture, anyway.

The tariffs are simply a means to an end. The president is trying to get China to start buying more of our stuff. He knows the so-called Middle Kingdom, which now has the second-biggest economy in the world, responds to incentives more than to nice words. These tariffs give China an incentive to open up.

OK, so China’s first reaction is just to retaliate. Big deal. That’s just posturing.

Right now we export less to China than we do to Japan, South Korea and Singapore put together. That’s the point. So the effect of China’s new tariffs on the U.S. are yet another rounding error. Even if China banned all imports from the U.S., that would amount to only 0.6% of our gross domestic product. And we’d sell the stuff somewhere else.

Don’t buy the hysteria. President Trump is simply trying to pressure our biggest competitor to buy more American goods. That should be a good thing, even if you don’t like him.

Arends is not, as far as I know, a Republican or a conservative. Marketwatch lists him as “an award-winning financial columnist with many years experience writing about markets, economics and personal finance. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He has worked as an analyst at McKinsey & Co., and is a Chartered Financial Consultant. His latest book, Storm Proof Your Money, was published by John Wiley & Co.”

So Arends may be right. We better hope he is.

 

Tax cuts and the economy

M.D. Kittle:

The booming economy of 2019 continues to be fueled in large part by the GOP Tax Cuts and Jobs Act of 2017. 

And Badger State companies and their employees continue to reap the rewards of tax relief. 

“Also, what may not be as immediate is (the tax savings) have allowed us to bank some cash…It’s a fact that there are going to be funds there for us to be able to put toward capital expenditures when the time is right,” Jung said.

U.S. gross domestic product (GDP), according to initial reports from the U.S. Commerce Department, grew by a whopping 3.2 percent in the first quarter, crushing estimates and soothing worries of a looming economic slowdown.

Companies like Pewaukee-based Trico Corp.have much to do with the U.S. economy’s impressive expansion. Bob Jung, CEO of the century-old industrial lubricants business, will tell you that the $1.5 billion tax relief package passed by the Republican-controlled Congress and signed into law by President Trump continues to benefit businesses like his — and Trico’s employees. 

A year ago, Jung confirmed that, thanks to the tax cuts, Trico would provide $650 bonuses to its workforce, and the employer planned to increase contributions to employee 401(k) accounts. The company also expected to hire more full-time workers. Jung said Trico paid out those additional benefits earlier this year. 

The lower tax rates for S corporations like Trico have made a big difference to the bottom line. But the reform package also included beneficial accounting changes. Jung’s company was able to change from accrual to cash accounting, allowing Trico to recognize revenue and expenses only when money changes hands, not when revenue is earned and expenses are billed (but not paid) under accrual accounting. 

Jung said the tax cuts have helped the company expand products and services to customers. Trico sales are up 10 percent on the year, he said.

“Also, what may not be as immediate is (the tax savings) have allowed us to bank some cash,” the CEO said. “It’s a fact that there are going to be funds there for us to be able to put toward capital expenditures when the time is right, perhaps in the fourth quarter.” 

Such sentiment bodes well for economic expansion ahead. 

Economists’ consensus had pegged GDP growth at about 2.5 percent to start the year. Many are upping their full-year estimates following the latest numbers on top of a healthy 2.9 percent growth rate in 2018. On average, the U.S. economy has added 180,000 jobs in the first three months of the year, while the major markets continue to break records. 

Corporate America brought back nearly $670 billion in offshore profits to the U.S. last year, according to the U.S. Commerce Department.

Grover Norquist, president and founder of Americans for Tax Reform, said the GOP tax reforms were designed to ramp up economic growth over the next three to four years. When you cut corporate income tax rates from 35 percent to 21 percent, however, that frees up a lot of capital to reinvest, Norquist said. And U.S. companies have done just that. 

Corporate America brought back nearly $670 billion in offshore profits to the U.S. last year, according to the U.S. Commerce Department. That’s a considerable amount, even as Bloomberg and other media outlets chortled that it was a far cry from the $4 trillion President Trump predicted would return post-tax reform. 

“We saw the growth immediately from the first year, so imagine what will happen over the next two, three, four or five, six years (with) the most powerful, pro-growth, pro-wage increase” tax reform law, Norquist told MacIver News Service in a recent edition of the MacIver NewsMakers podcast. 

U.S. businesses continue to pass along their tax savings to employees, to consumers, and to their communities. 

Americans for Tax Reform has tracked some 800 examples of new hires, pay raises, benefit increases, bonuses, facilities expansions, and utility rate reductions directly related to the tax cut package. This incomplete list, which only notes firms that have made public announcements, includes the largest corporations to the smallest shops — including dozens of Badger State companies, like Trico.  

And Madison-based Musicnotes, Inc. 

Last year, the worldwide leader in digital sheet music, announced it was giving 3 percent salary increases to its 55 employees, thanks to the corporate tax cuts. Tim Reiland, the company’s executive chairman, said Musicnotes intended to expand its workforce. 

“We definitely benefitted from the tax reform and we have passed some of that along and continue to do that,” Reiland said.

It has done that and more. 

“This is a really positive story for us and it continues,” Reiland told MacIver News last week. “We definitely benefitted from the tax reform and we have passed some of that along and continue to do that.” 

Musicnotes has added six positions, boosted salaries by an average of 10 percent, and expanded office space by about 15 percent since the beginning of 2018, Reiland said. He calls it the “virtuous circle.” 

A lot of the company’s growth has to do with its products and the people behind them, Reiland said, but a significantly lower corporate tax rate certainly helps. 

“It’s very real. It’s cash flow. That’s what you need to grow a business,” he said. “It has been a significant benefit to us, and we’ve shared, we’ve rewarded, we’ve plowed back and we continue to do that.” 

Beyond business expansion and employee bonuses, a lot of companies have used a portion of their tax savings to benefit their communities. Case in point, CUNA Mutual Group. The Madison-based mutual insurance provider was able to make the largest contribution ever — $20 million — to its philanthropic foundation, thanks in part to tax reform. 

“The reform benefit is helping us,” said CUNA Mutual spokesman Phil Tschudy. “The reason we did this is so we could ensure that our foundation is funded for years to come, regardless of economic situations.” The foundation turned 50 this year.

Consumers, too, continue to benefit from the 2017 tax reform law. 

State regulators announced last year that WE Energies’ electric customers would receive a one-time credit in July and a slight decrease in rates “from a portion of the savings from the company’s lower federal corporate tax rate.” The Milwaukee utility’s customers received a combined $374 million in refunds, through bill credits, in 2018, according to WE Energies spokesman Brendan Conway. 

“We have also lowered the amount of debt customers would have had to repay us $47.2 million,” he said in an email. 

On top of that, the utility’s recent filing with the state Public Service Commission proposes to use an additional $111.3 million in tax savings to lower customer costs in 2020 and 2021. 

Democrats, led by Speaker of the House Nancy Pelosi and Senate Minority Leader Chuck Schumer called the benefits delivered by the tax cuts “crumbs.” But employers and workers nationwide have been able to keep a lot more bread — and impressive economic growth shows the power unleashed when taxpayers are freed from the burdens of taxation.

Evers vs. business, part 1

M.D. Kittle:

Gov. Tony Evers’ plan to cut middle-income taxes by raising taxes on Wisconsin’s vital manufacturing sector is making some employers nervous.

And that’s not what the doctor ordered for a resurgent sector that not that long ago seemed to be on life support.

“I have an advanced manufacturer in my district in the process of trying to expand their business. Now they are are concerned, with the rhetoric coming out of the East Wing, they’re not sure if it’s the right to expand their business,” state Sen. Patrick Testin (R-Stevens Point) told MacIver News Service last week on the Vicki McKenna Show on NewsTalk 1130 WISN.

The markets may hate uncertainty, and business deplores it.

“This is not the time we should send out mixed messages within the state of Wisconsin that’s going to put any new development or growth on ice,” Testin said. “We should continue to pursue policies that are going to grow our economy.”

Evers campaigned on a pledge to cut taxes 10 percent on middle-income earners, amounting to about $225 in tax relief for the average filer. The Democrat’s plan, yet to be fully defined, would be paid for in large part by hiking taxes on manufacturers that make more than $300,000 annually. Those who do exceed the income limit would no longer receive the state’s manufacturing and agricultural tax credit. Evers says the cap would generate about $518 million to pay for his proposal, leaving nearly $375 million at present unpaid for.

An Assembly Republican tax relief packagewould also target middle-income earners, delivering a $300-plus income tax cut for the median income family, according to the Legislative Fiscal Bureau. Republicans fund their proposal using about $340 million annually from the projected $2.4 billion in additional tax revenue over the next couple of years.

The bill, which passed last week in the Legislature’s Joint Finance Committee on a party-line vote, is slated for floor debate this week in the Republican-controlled Legislature.

Evers’ plan appears to be a nonstarter for Republicans.

“We are not going to raise taxes — period,” said Assembly Speaker Robin Vos (R-Rochester). “We are not going to raise taxes, especially on our job creators, when we have a huge budget surplus.”

Capping the tax credit, critics say, could be disastrous for a rapidly expanding manufacturing sector that has helped the Badger State keep its unemployment rate at 3 percent or lower for nearly a year.

The state added 9,100 private-sector jobs in December, according to the latest preliminary data from the Wisconsin Department of Workforce Development.Wisconsin’s unemployment rate remained at 3 percent.

Wisconsin added 44,900 private-sector jobs from December 2017 to December 2018, with weekly wages rising a robust 4.5 percent in year-over-year comparisons. Wisconsin’s private-sector wages grew on average by 5.7 percent in the first five months of 2018, according to Census Bureau data. That compared to 2.7 percent for the entire U.S.

Manufacturing has had a lot to do with the strong economy.

A big reason for manufacturing’s resurgence in Wisconsin is tax policy change over the last eight years, particularly the manufacturing and agriculture tax credit that was among Republican Gov. Scott Walker’s top first-term initiatives. A 2017 University of Wisconsin-Madison analysis of the tax credit found it had accounted for the addition of more than 20,000 manufacturing jobs and more than 42,000 total jobs over a three-year period.

Capping the tax credit would have real-world implications on businesses that have helped build Wisconsin’s economic turnaround.

The vast majority of Wisconsin businesses in the U.S. — and Wisconsin — are pass-throughs, such as S-corporations and sole proprietorships. The tax structure passes income through to the businesses owners to be taxed under the individual income tax, not at the corporate rate. It reduces the effects of double taxation faced by traditional C-corporations.

In December’s extraordinary session, the Legislature passed a bill allowing pass-throughs the ability to choose between filing under the individual tax code or the higher 7.9 percent corporate rate. In that case, the businesses aren’t capped by the $10,000 limit on individual income tax deductions.

Most pass-throughs are small businesses with $10 million or less — much less in many cases – in sales or receipts. Evers’ tax increase on small manufacturers with taxable income of more than $300,000 would more than likely stymie job creation and production expansion in Wisconsin, Testin said.

That’s why it’s critical, Testin said, that the Legislature hold the line on any attempt to raise taxes.

“That’s the wrong approach right now. We don’t need to,” the senator said. “The (Legislative) Fiscal Bureau numbers show we are in sound fiscal ground right now. To upend the apple cart and send a chilling message to the business community in the state that we have an administration that wants to be tax happy, it’s the wrong call.”

Ask Bill Smith what he thinks about the legislative battle over tax cuts and he’ll tell you lawmakers should instead focus on repealing one of the state’s most inequitable taxes: The personal property tax.

“We urge the governor and the Legislature to get rid of the personal property tax and give Main Street some real relief,” Smith, state director of NFIB Wisconsin told MacIver News Service.

Wisconsin law has long taxed businesses on their personal property. The business community got a partial victory in the last session, when the Republican-controlled Legislature passed a $75 million repeal, exempting machinery, tools and patterns from the personal property tax code.

True fairness, Smith said, will come when the entire tax is wiped out.

“Doing so would impact every business on Main Street equally, without picking winners and losers,” he said.

Foxconn’s on/off switch

The Milwaukee Business Journal:

Foxconn Technology Group on Friday said it will build an LCD screen fabrication facility in Mount Pleasant, a move that was put into question after reports earlier this week of the company reconsidering its plans.

The company said the decision came after “productive discussions between the White House and the company, and after a personal conversation between President Donald J. Trump and Chairman Terry Gou.” That Gen 6 plant will fabricate smaller, high-resolution LCD screens than the company had originally planned to make in its Mount Pleasant plant.

Reports from Reuters and Japanese news publication Nikkei Asian Review had called into question whether Foxconn would be fabricating any LCD screens in Wisconsin at all. The company earlier this week committed to building packaging plants, assembly facilities and research centers over the next 18 months in Mount Pleasant. But it fell short of committing to the Gen 6 fabrication plant to make TFT, or “thin-film-transistor” screens.

“Our decision is also based on a recent comprehensive and systematic evaluation to help determine the best fit for our Wisconsin project among TFT technologies,” Foxconn’s written statement Friday announced. “We have undertaken the evaluation while simultaneously seeking to broaden our investment across Wisconsin far beyond our original plans to ensure the company, our workforce, the local community, and the state of Wisconsin will be positioned for long-term success.”

That fabrication plant could break ground over the next 18 months, according to a Friday statement from Racine County, the village of Mount Pleasant and the Racine County Economic Development Corp. The company in April is expected to hold open houses regarding its upcoming construction plans.

Foxconn’s announcement ends a week where the firm’s Wisconsin plans attracted extreme scrutiny. A Reuters story on Tuesday raised speculation that Foxconn may not manufacture in Wisconsin at all, a point the company refuted.

Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce, described it as watching “a Twitter world collide with a dynamic, global business decision.”

Foxconn’s strategy in Wisconsin has evolved over the past six months, which is in keeping with the company’s reputation of being flexible and responsive to market conditions.

Foxconn first announced last year it was backing off from plans for a Gen 10.5 facility in Wisconsin to make very large LCD screens. Instead, the Gen 6 plant will produce small to mid-sized displays that would be used in televisions and by automakers.

“Over the last year at least, the capacity for the large LCD screen manufacturing in China has grown exponentially, and the cost has been cut in half,” Sheehy said.

The actual fabrication of screens in Wisconsin is significant. The company is building Gen 10.5 plants in China, but such operations don’t exist in the United States. Fabricating the screens, versus assembling products around the finished LCD displays, was expected to attract a new supply chain of manufacturers to Foxconn’s plant.

Sheehy said there is value to Foxconn’s research and development operations planned for Wisconsin, but the fabrication plant creates “an opportunity for supply chain and a more robust capital investment.”

Contractors over the last several months have leveled an estimated 3-million-square-foot plot of land near Interstate 94 in Mount Pleasant that was intended for the fabrication facility. That facility is to be the centerpiece of a larger manufacturing and technology campus Foxconn is developing.

That campus will also include extensive research and development operations to explore new applications of Foxconn’s technology in health care and other arenas. Foxconn earlier this week also planned to build a data center and rapid prototyping center at its Mount Pleasant campus.

Foxconn gets Covingtonned

I have decided to create a new verb: “to Covington,” which means to jump to conclusions about a particular thing well before even most of the facts are in. It comes from, of course, the Covington incident.

George Mitchell explains:

The lesson I try to keep in mind recalls the immediate reaction — almost all of it wrong — regarding the March for Life incident involving students from a Catholic high school in Kentucky.

Trying to keep an open mind, it will be helpful to read factual analyses that one hopes will be forthcoming from public sources such as the Legislative Fiscal Bureau and private researchers at the Wisconsin Policy Forum.

It is entirely possible, as Democrats today gleefully proclaim, that Wisconsin was snared by a gigantic bait and switch.  The most substantive support I have seen for that position is a statement attributed to Foxconn that the market has dramatically switched in the last 18 months. Really? All of a sudden it makes no sense to manufacture here what they said they would make?

Alternatively, the structure of the state’s contract with Foxconn might mean that both the benefits to the state and its costs are proportionally lessened. This will be true if the pledges were correct that the bulk of taxpayer subsidies were/are linked to tangible results.

I would have voted for the Foxconn “deal.” I considered it a risky big bet that was worth taking. I am prepared, once more facts are available, to acknowledge an error in judgment. Or, the truth might support a view that the potential of Foxconn still is a net benefit for Wisconsin. We don’t know enough yet to decide.

Three Racine County officials felt the need to correct yesterday’s hysterical media reports:

To date, Foxconn has invested over $200 million in Wisconsin. We have seen much of this
locally – including Foxconn’s investment in more than $100 million in construction contracts
that have transformed the project site, the completion of the first 120,000 square foot
building on the campus and the entire 3 million square foot pad that will serve as the base
for the next phase of construction, which will begin in Spring 2019.

Contrary to what was reported by Reuters, Foxconn reiterated to us, today, its commitment
to building an advanced manufacturing operation in Wisconsin, in addition to its commitment
to create 13,000 jobs and invest $10 billion in Racine County. As Foxconn has previously
shared, they are evaluating exactly which type of TFT technology will be manufactured in
Wisconsin but are proceeding with construction on related manufacturing, assembly and
research facilities on the site in 2019.

We understand that Foxconn must be nimble in responding to market changes to ensure the
long-term success of their Wisconsin operations. We fully expect that Foxconn will meet its
obligations to the State, County and Village.

Both the local and state development agreements are legally binding and include strong
protections for taxpayers. The state agreement, which was largely based on job creation,
ensures that Foxconn only receives state tax credits if it meets or exceeds its targeted hiring
amounts in any given year.

The local development agreement stipulates that, if, for any reason, Foxconn’s investment
on the campus falls short, the company remains obligated to support a minimum valuation
for the project of $1.4 billion, which will more than pay for all public improvements and
development costs for the project.

The Milwaukee Business Journal, which unlike most media knows something about business, adds:

Top Foxconn Technology Group executive Louis Wooreconfirmed for Wisconsin Gov. Tony Evers and Milwaukee-area economic development officials Wednesday that the company is proceeding with its $10 billion project in Racine County while dismissing as inaccurate a Wednesday story from Reuters news service.

Woo made big news in Wisconsin via the Reuters report that the Taiwanese technology firm is reconsidering whether to produce LCD video screens there at all. Woo, who is special assistant to Foxconn founder and CEO Terry Gou, was quoted by Reuters as saying Foxconn may shelve plans for an assembly plant in Mount Pleasant and that “in Wisconsin, we’re not building a factory.”

Leaders of the Milwaukee 7 regional economic development group, which played an instrumental role in recruiting Foxconn, “were totally taken aback by the Reuters story,” said co-chairman Gale Klappa, who also is chairman and CEO of WEC Energy Group in Milwaukee. Klappa said he and Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce, emailed Woo Wednesday morning for a response to the Reuters article.

The information in the Reuters article was “completely inconsistent” with what Foxconn representatives have been communicating to the Milwaukee 7 about the Mount Pleasant project, Klappa said. Woo’s response eliminated Klappa’s concerns, as the Foxconn executive said he was quoted out of context, Klappa told the Milwaukee Business Journal.

A spokesperson for Reuters and Woo could not immediately be reached for comment.

Klappa said Woo told him and Sheehy that the company has not changed its commitment to expand in Wisconsin and still plans to hire up to 13,000 employees.

Klappa said Woo also called Evers Wednesday morning to give Evers assurances that the Reuters story does not represent the company’s plans.

Evers’ office issued a statement at 12:10 p.m. Wednesday from Wisconsin Department of Administration Secretary-designee Joel Brennan in response to the Reuters article.

“The administration is in regular, weekly communication with senior leadership at Foxconn; however, we were surprised to learn about this development,” Brennan said.

Some of the information in the Reuters story has been previously reported, Brennan noted. Other details about the continuing evolution of this project “will require further review and evaluation by our team,” Brennan said.

“Our team has been in contact with Foxconn since learning this news and will continue to monitor the project to ensure the company delivers on its promises to the people of Wisconsin,” Brennan said.

The Evers administration will continue to commit time, resources and personnel “to ensure that the interests of Wisconsin workers and taxpayers are protected and promoted by our approach to the Foxconn project,” Brennan said.

Evers told the Milwaukee Business Journal in January that he had held discussions in person and on the phone with Woo and Foxconn executive Alan Yeung in an effort to open lines of communication. The company is eligible for billions of dollars in state tax credits, depending on its total hiring and capital expenditures.

The Wisconsin Economic Development Corp., which administers the state’s contract with Foxconn, issued a statement Wednesday afternoon that the contract “provides the company the flexibility to make these business decisions, and at the same time, protects Wisconsin’s taxpayers.”

“Over the past 45 years, Foxconn’s success has been based on the company’s ability to foresee and adapt to technological advancements,” WEDC said. “Foxconn’s long-term success both globally and within Wisconsin is centered around the alignment of its business model with ever-changing global economic conditions, including evolving customer demands.”

Woo did reiterate his remarks from recent months that the company’s employment needs for its planned $10 billion campus in Mount Pleasant would likely require more engineers than assembly workers, which is a reversal from the company’s initial plans.

Klappa pointed out that Woo’s email said the company is rethinking what technology it will build in Wisconsin due to “the changing dynamics of the economy the past two years.”

Foxconn will proceed with six components of the Mount Pleasant project over the next 18 months, Woo said in the email, according to Klappa. They are:

• A liquid crystal module packaging plant;

• A high-precision molding factory;

• A system integration assembly facility;

• A rapid prototyping center;

• A research-and-development center;

• A high-performance data center; and

• A town center to support employees in Mount Pleasant.

The Reuters story also states that “a company source” said Foxconn would employ about 1,000 workers by 2020 rather than the initial plan to employee 5,200.

Klappa said Woo’s email did not specifically address that point. However, Klappa said he believes Woo’s assurances.

“Frankly, given Louis’ comments on the overall accuracy of the story, I’m dubious about anything” in the article, Klappa said.

The economic ignoramus who would be governor

I have lived in this state my entire life (sometimes, I don’t know why), and I have voted in every election since the 1984 presidential primary.

In that time, I do not believe I have ever run into a candidate as ignorant about business as Tony Evers, who thinks he should be governor. Perhaps this isn’t a surprise given the fact that Evers has never had a private-sector job in his entire life.

The same could be said about Scott Walker, except that Walker learned somewhere along the way how business works and therefore made policy changes from the steaming pile of disaster that was this state in the late 2000s after Gov. James Doyle’s $2 billion tax increase. Doyle was at least correct about the importance of imports to this state’s economy. For that matter, Democratic Gov. Tony Earl at least paid attention to the issue of the state’s business climate. Democratic Gov. Patrick Lucey enacted the manufacturing and equipment property tax exemption, which has been law since the mid-1970s, through Republican and Democratic governors and legislatures.

Evers started by proposing to eliminate what now is the manufacturing and agriculture tax credit so that he could have more money for his voter base, public employee unions, specifically teacher unions. He then proposed to eliminate the Wisconsin Economic Development Corp. and replace it with nothing, though his candidate for lieutenant governor, Rep. Mandela Barnes (D–Milwaukee), wants to bring back the Department of Commerce, which under Doyle wasn’t very effective in promoting the state as a place to do business. (Regulatory agencies are about taking away, not improving.)

Evers and other Democrats have been borderline racist, by their own standards, in condemning Foxconn, which is interesting given that some of the biggest fans of Foxconn’s coming to Wisconsin is the UW System. (Maybe that’s why Evers says he hates going to UW Board of Regents meetings.) Democrats would be falling all over themselves congratulating themselves for bringing Foxconn and its 3,000 to 13,000 jobs had their party made the deal.

Doubling down, Evers said earlier this week that a minimum wage of $15 per hour is “minimum,” and, hey, maybe it should be higher. Evers evidently wants to bankrupt every small business in this state, another sign that Evers doesn’t know the first thing about how business or the economy work.

 

From the party of “small” government

One reason why the Libertarian Party is likely to never gain a foothold in Wisconsin is that the poliitical culture of Wisconsin is extremely non-libertarian, with the party of big government currently in control over the party of bigger government.

Evidence comes from James Wigderson:

The state legislature could consider a bill that would require a liquor license for serving alcohol at many private events if the Tavern League and its allies in the legislature have their way. A draft billaimed at shutting down competition from agriculture event venues (AEV), often referred to as “wedding barns,” is being considered by the Legislative Council Study Committee on Alcohol Beverages Enforcement.

new memo released Tuesday afternoon from the Wisconsin Institute for Law & Liberty (WILL) warns that, just like a previous attempt by the Tavern League would have ended tailgating in Wisconsin, this bill could have some unintended consequences.

“The same folks who would’ve banned drinking beer while tailgating at Lambeau Field earlier this year are back at it again, only now their proposal would regulate drinking beer at private events like weddings and even at vacation homes and on pontoon boats,” said Lucas Vebber, deputy counsel for WILL. “Once again, this is an attempt by special interests in Madison to curtail freedom for Wisconsinites and use the heavy hand of government to shut down competition. What major policy problem this legislation solves continues to be a mystery to us.”

Under the current law, private events are not required to have liquor licenses provided that alcohol is not sold on the premises. This has allowed an emerging industry of alternative venues for private events, including on privately-owned farms that have rental space for weddings, corporate gatherings and other private events.

The Tavern League has sought to “level the playing field” by trying to force AEVs to get liquor licenses with all of the regulations that come with even though the wedding barn operators have no intention of operating bars that are open to the public. The requirement would not only be costly, forcing many of the AEVs to shut down, but in many communities the number of liquor licenses are extremely limited in availability because of a state law that enforces a quota on each municipality – a law also supported by the Tavern League.

The new proposed law could prohibit the legal consumption of alcohol at many private events and would require a license or permit for when people consume alcohol on rental property.

The Legislative Council Study Committee on Alcohol Beverages Enforcement studying the draft bill targeting AEVs is dominated by the Tavern League and its allies, including the chairman Rep. Rob Swearingen (R-Rhinelander), a supper club owner and a former president of the Tavern League. No owner of an AEV was allowed to serve on the committee.

The study committee has discussed a number of issues regarding AEVs, including many issues that have nothing to do with state alcohol policy, in order to justify state regulation of the wedding barns to limit competition for the Tavern League.

However, the draft bill being considered by the committee may do more than attack the wedding barn industry. The bill is very similar to the proposed legislation that would have had the unintended consequences of banning tailgating at major sporting events such as Packer and Brewers games. According to Vebber, the bill now carves out exemptions for those types of events.

But the legislation still has issues beyond its purpose to try to kill a part of the Wisconsin economy. It could affect everything from drinking outside major concerts to even banning drinking alcohol at deer hunting campsites.

“This is the most interesting [exemption] I think: vacation rental properties or any other temporary lodging that is used for overnight accommodations if the property is furnished with sufficient beds for all adult guests to sleep,” Vebber said. “They’re saying, you don’t have to get a permit for a vacation rental property but only if that property has enough beds for the adult guests to sleep? So, basically you can have people over at your rental property, but only if you have enough beds for everyone to sleep in.”

Vebber explained how this could be a problem.

“So if I go up north, and your family and my family go up north, and we rent two cabins right next to each other, and they’re both one bedroom cabins and the kids are going to sleep on the couch,” Vebber said. “I cannot have you and your wife over to my cabin for a dinner party and serve you a Miller Lite. It’s a vacation rental property, I don’t have a permit, and I don’t have enough beds for all of the adult guests.”

Vebber said the result may not have been the intention of the draft bill, but it’s what happens when you try to craft a bill to serve a special interest like the Tavern League.

The legislation could even affect Wisconsin’s deer hunting traditions by requiring owners of land that rent out to hunters to get alcohol licenses if the hunters decide they want to drink beer at their camp unless there are “sufficient beds” for every adult at the campsite.

“Rented hunting land may even fall under this requirement if you plan to stay overnight,” the WILL memo states. “So if this proposal passes, be careful cracking a beer at deer camp after a long day in the field.”

The WILL memo also asks about the enforcement of the proposed law.

“There is also the question of how the state would intend to enforce such requirements: will revenue agents be knocking on doors to count beds during your next dinner party?” the memo asked.

The government giveth, the government (forces businesses to) taketh

Republicans, not Democrats, passed the $100-per-child tax rebate earlier this year and the sales tax holiday last month.

But as the party in charge in Madison, Republicans are responsible for what the MacIver Institute reports:

Wisconsinites hunting for back-to-school deals are out of luck for yet another year thanks to the state’s minimum markup law, which outlaws sale prices that are too low.

The minimum markup law, formally known as the Unfair Sales Act, bans retailers from selling merchandise below cost. The law was originally passed back in 1939 and also requires a 9 percent price markup on specific items like alcohol, tobacco and gasoline.

Unfortunately for back-to-school shoppers, Wisconsinites are forced to pay for this archaic law that’s still on the books despite multiple attempts to repeal it.

According to advertisements obtained by the MacIver Institute from the end of August, Walmart stores in Milwaukee charged higher prices for a number of common back-to-school items compared with other Walmart stores in  Iowa and Michigan.

Like in past years, families in Milwaukee buying basic items like notebooks, markers, and crayons can expect to pay anywhere from 14 to 146 percent more than Walmart shoppers in Dubuque, Iowa, and Kalamazoo, Mich.

A 24-pack of Crayola Crayons posted the largest price difference, costing 146 percent more in Milwaukee than in cities in the neighboring states. The same was true for similar basic school supplies.

Parents picking up a one-subject notebook at Walmart in Dubuque, for example, only paid 25 cents. That same notebook cost 40 cents in Milwaukee – a 60 percent gap. Crayola markers cost 97 cents in Kalamazoo, but thanks to the archaic minimum markup law, those same markers cost $1.97 in Milwaukee, a whopping 103 percent difference.

A Texas Instruments graphing calculator cost $100 in Milwaukee, but just $88 in both Iowa and Michigan.

The added costs stack up. A basic shopping list would cost 17 percent more for a Milwaukee back-to-school shopper than in nearby states – 85 percent more not including the calculator.

Efforts to repeal the antiquated minimum markup law stretch back several years. Most recently, a partial repeal bill led by Sen. Vukmir and Rep. Jim Ott, and joined by Sen. Dave Craig and Rep. Dave Murphy, was the first repeal attempt to receive a hearing in the legislature.

“What are you hoping to accomplish by keeping this outdated law on the books?” Todd Peterson, regional general manager for Walmart Stores in Wisconsin, asked the Senate Committee on Agriculture, Small Business and Tourism. Much has changed since the law was enacted in 1939, he and his colleagues argued.

But as with previous attempts at repealing the anti-consumer law, that bill went no further.

Even though minimum markup repeal has hit a wall in the Legislature, a 2015 poll found that Wisconsinites are tired of paying higher prices and want the law finally taken off the books. The poll found 80 percent of respondents had an unfavorable view of the minimum markup law when told “Wisconsin residents are required to pay more for many on-sale items than residents in neighboring states simply because of this 75-year-old law.”

Respondents were just as angry when told that “the law forbids retailers from selling to consumers below cost and also requires that gasoline retailers sell gas to consumers with a minimum 9 percent markup.”

The minimum markup law also outlaws many of the discounts posted on popular national bargain hunting days like Black Friday or Amazon Prime Day, which in Wisconsin could better be called “Amazon Crime Day.”

While this year shoppers in Wisconsin enjoyed a sales tax holiday on many back-to-school items earlier in August, bargain hunters would save money year-round on virtually all products if not for the minimum markup law.

With repeal efforts once again stalled at the doors of the Legislature, bargain hunters should beware: Wisconsin’s Price Police remain on the prowl during yet another back-to-school shopping season.

The next time you see a candidate for this fall’s election, ask him or her whether he or she favors repeal of the minimum markup law, and if not, why not.

T-minus 75 days and counting

A new Marquette Law School Poll of Wisconsin voters finds a tight race for governor following last week’s statewide primary elections. Among likely voters (that is, those who say they are certain to vote), incumbent Republican Scott Walker receives 46 percent, Democrat Tony Evers receives 46 percent and Libertarian Phil Anderson 6 percent. Only 2 percent say they lack a preference or do not lean to a candidate.

Among likely voters in the race for the Wisconsin U.S. Senate seat on the ballot in November, 49 percent support the incumbent, Democrat Tammy Baldwin, and 47 percent support Republican Leah Vukmir, while 3 percent say they lack a preference or do not lean toward a candidate.

Among all registered voters surveyed in the poll, the race for governor remains tight, with Walker at 46 percent, Evers at 44 percent and Anderson with 7 percent.

There is a wider margin among all registered voters in the Senate race, with Baldwin receiving 51 percent and Vukmir 43 percent.

Awareness of Evers and Vukmir has increased among registered voters since the last Marquette Law School Poll in July. Forty-six percent lack an opinion of Evers, down from 60 percent in July. For Vukmir, 48 percent lack an opinion now, compared to 66 percent in July.

Among likely voters only, 35 percent lack an opinion of Evers and 41 percent lack an opinion of Vukmir.

Evers is viewed favorably among 38 percent of likely voters and unfavorably by 27 percent. Among all registered voters 31 percent have a favorable view and 23 percent an unfavorable opinion.

Vukmir has a 30 percent favorable rating and a 29 percent unfavorable rating among likely voters while among registered voters 25 percent rate her favorably and 26 percent rate her unfavorably.

Few respondents lack opinions of the incumbents. Among all registered voters, 5 percent lack an opinion of Walker and 17 percent have no opinion of Baldwin. For likely voters, 4 percent have no opinion of Walker and 11 percent have no opinion of Baldwin.

Walker is viewed favorably among 49 percent of likely voters and unfavorably by 47 percent. Among all registered voters 49 percent have a favorable view and 45 percent an unfavorable opinion.

Baldwin has a 46 percent favorable rating and a 42 percent unfavorable rating among likely voters while among registered voters 43 percent rate her favorably and 40 percent rate her unfavorably.

The governor’s race results are similar to what the poll found at this point in the 2014 cycle. The August 2014 Marquette poll showed Democrat Mary Burke with a 2-point lead over Walker among likely voters, but Walker leading by about 3 points among registered voters.

All things considered, this is good news at least for Walker, and maybe for Vukmir too. Walker predicted last week he’d be behind in the first post-primary polls, but he’s not in the poll that is more credible than other polls.

That point about where Walker was four years ago is important as well. Four years ago voters didn’t know who Mary Burke was, but they came to discover her overstated involvement in her family business and other things that proved she wasn’t ready to be governor.

Four years later, Evers is going to have to explain a few things, such as what James Wigderson reports:

Americans for Prosperity is spending $1.8 million on an advertising campaign to remind voters Evers actually praised Governor Scott Walker’s last education budget before the schools superintendent decided to run for governor himself. Evers was for Walker’s budget before he was against it.

Thanks to his pro-growth policies, Governor Walker has invested millions in our schools and received a lot of praise:
A “pro-kid budget …” 
An important step forward …” 
“… Commitment for K-12 education is good news …”  
So who said those things? Tony Evers. 
But now that Evers if running for office, he’s trying to take back his praise.
The truth? Governor Scott Walker is improving Wisconsin education … and Tony Evers knows it.
Paid for by Americans for Prosperity. 
Not authorized by any candidate, candidate’s agent or committee.

Eric Bott, the state director of Americans for Prosperity in Wisconsin, commented on the flip-flop by Evers in a release announcing the ad buy.

“Tony Evers had it exactly right when he praised Governor Walker’s education budget as a ‘pro-kid budget,’ an ‘important step forward,’ and ‘good news,’” Bott said. “Now that he wants Scott Walker’s job, Evers is backpedaling so fast, I’m worried he’s going to end up in Minnesota before too long.”

There is concern over whether Walker could suck resources from other Republicans, specifically either Vukmir or Attorney General Brad Schimel, whose opponent should be elected if you believe in lawsuits for the sake of lawsuits instead of, you know, law and order.

More from the poll:

When asked the most important issue facing the state, 24 percent of registered voters pick jobs and the economy, 22 percent choose K-12 education and 19 percent say health coverage is their most important issue. No other issue reached double digits as “the most important,” although the condition of roads ranked fourth, with 9 percent of registered voters selecting it.

When voters were asked for their second-most-important issue, the condition of roads rose to the top three most-frequent answers, with K-12 education first at 18 percent, jobs and the economy at 17 percent, the condition of roads at 16 percent and health coverage at 15 percent.

I bet the economy number is actually bigger with voters. In fact, in my lifetime, every election has been decided by the economy, or more accurately voters’ perception of the economy. If voters think the economy is doing well, they vote for incumbents. If they don’t think the economy is doing well, they don’t vote for incumbents.

Fifty-three percent of Wisconsin registered voters see the state as headed in the right direction while 41 percent think the state is off on the wrong track. In July, 52 percent said right direction and 42 percent said wrong track.

Walker’s job approval among registered voters stands at 48 percent, with 45 disapproving. … Among likely voters, 50 percent approve and 47 percent disapprove.

All of this is generally in keeping with what was reported here last week — that among “swing” counties Walker is doing pretty well.

There is also this, though how it will affect this election is unclear, as pointed out by Facebook Friend Nathan Schacht:

More Dems than Republicans are against tariffs.
58% of Republicans think steel tariffs will help the economy, 9% of Dems think they will help.

On free trade, more Dems than Republicans think free trade agreements are a good thing:
45% of Republicans think they are good,
72% of Democrats think they are good.

So the Democrats are more conservative on trade issues now…good Lord.

I’m not sure “more conservative” is as correct as “more free-market,” except that Democrats are certainly not free-market on such other issues as education and health care. One wonders if Democrats have suddenly realized the virtues of free trade, or if Democrats are now free-trade because Trump isn’t. I think I know the answer by posing the question of whether Democrats have discovered the virtues of free markets in education and health care.

 

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