Key Takeaways:
States forfeit hundreds of millions in tax revenue
Few jobs created compared to other industries
Power grid strain and environmental impact a concern
What Happened?
States like Virginia, Georgia, and Ohio have given up $750 million, $435 million, and $89 million, respectively, in tax revenue from incentives offered to data centers. The breaks were meant to lure tech investment and jobs, but data centers only employ dozens compared to factories.
Electricity use is also set to rise 15% annually through 2028, which has lawmakers questioning whether the incentives are worth the budget and environmental impact. Over half of states offer some tax breaks to data centers.
Why It Matters?
Data centers contribute hundreds of millions in other taxes and investments but create relatively few jobs. A 2016 report found incentives cost $2 million per job created. Critics see subsidies as wasteful spending, a drain on budgets and grids.
However, the industry argues economic gains outweigh incentives. Direct employment was 560,000 in 2022. Centers also enable broadband and remote infrastructure.
What’s Next?
In Georgia and Virginia, bills introduced this year aim to cut or analyze incentives. However, lobbying and business interests make reforms an uphill battle. Suspending breaks could disrupt investment, says the Data Center Coalition.
Still, some analyses found that tax revenue generated was less than the value of incentives offered. Lawmakers seem set to continue assessing the costs and benefits. The focus is on balancing investment interests with calls for fiscal prudence.
