Runaway Data Center Tax Breaks Endanger State Budgets
As States and Localities Face Federal Austerity
Washington, DC — Ten states already lose more than $100 million per year to data center tax abatements. Texas loses more than $1 billion annually and Virginia loses almost as much. Three states have had spikes of more than 1,000% in tax revenue losses to data centers in recent years.
Despite these alarming trends, of the 32 states with data center tax exemptions, 12 fail to disclose even just their aggregate revenue losses. Iowa discloses only every five years.
Those are key findings just released by Good Jobs First in its new study “Cloudy With A Loss of Spending Control: How Data Centers Are Endangering State Budgets.”
Data centers, the cloud-computing warehouses that were rapidly proliferating even before artificial intelligence accelerated their growth, create few permanent jobs but are extremely capital intensive. So when 32 states exempt their building materials and equipment from sale and use taxes, state (and local) treasuries lose huge sums of revenue. In at least six states, the exemptions are indefinite.
Troublingly, some of the biggest beneficiaries of these tax breaks are some of the world’s most valuable companies, including Amazon, Microsoft, Apple, Meta (the owner of Facebook and Instagram), and Alphabet (owner of Google).
(Note: This report looks primarily at state sales and use tax exemptions for data centers, which are the costliest state subsidies. It does not cover other kinds of subsidies given in some places, such as local property tax abatements, corporate income tax credits, and discounts on electricity and water rates, which are seldom disclosed).
Good Jobs First Senior Research Analyst and report co-author Kasia Tarczynska, said:
We know of no other form of state spending that is so out of control.
“Therefore, we recommend that states cancel their data center tax exemptions.Shy of that, states should amend enabling legislation to cap how much any facility and company can avoid paying in taxes each year.”
Shy of cancellation, Good Jobs First also recommends states pause these programs to consider the full impact of data centers on state budgets, residential and small business electricity prices, and harm to the “business climate” caused by rising electricity prices.
Finally, states should disclose the full costs of the subsidies annually by recipient, how many new jobs were created, wages, and what communities get in return.
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Runaway Data Center Tax Breaks Endanger State Budgets, source
