Tax Incentive Negotiations

Data center developers routinely ask for massive tax breaks from local and state governments including property tax abatements lasting 10-50 years, sales tax exemptions, reduced utility rates, and infrastructure subsidies.

Data center developers promise jobs and economic growth, but data centers are highly automated and often create far fewer permanent jobs than traditional industries while placing substantial burdens on local infrastructure. Fundamentally tax breaks exchange a guaranteed stream of revenue for promises that are less enforceable and usually of less value to the community. Companies wouldn’t be lobbying for tax breaks if they didn’t save money.

Often negotiations are made in secret leaving communities unaware until decisions have already been mostly hammered out. These agreements are then voted on by elected officials at public meetings, and may also require public hearings. These meetings create high-visibility political moments where organized opposition can directly influence outcomes by signing up to speak, submitting written comments, and publicizing how officials vote. As a result, unlike bureaucrats in regulatory processes, these decisions are made by local representatives who answer directly to voters.

The economic claims developers make are often vulnerable to scrutiny: independent fiscal analyses frequently reveal inflated job projections, understated infrastructure costs, impacts to house values, and better alternative uses of public money. Data centers can end up costing communities money in road building and maintenance, sewer and water hookups, and fire and emergency management equipment and training. This means that data center investors and operators are getting richer while communities foot the bill. At the same time, the resources allocated to supporting data center development are then not available for other types of growth and development that might be more beneficial to the community.

In Ohio, sales tax exemptions for data centers lost the state $1.6 billion in revenue, 12 times the state’s forecast in 2025. One study estimated that state and local revenue lost through data center tax exemptions could have covered 25,000 average teacher salaries in Virginia. If the data centers pay their fair share of taxes on the land and energy they use and the sales tax value of their property, communities could invest in teachers, schools, hospitals, parks, rec centers, tax breaks for people on fixed incomes, workforce housing, or other public goods.

This is where communities can reframe the debate from “jobs vs. no jobs” to “who really benefits from subsidizing this development?” and “what else could we be buying with our investment?” Communities can mobilize turnout at public hearings, commission independent fiscal impact studies, expose the gap between promised and actual jobs and impacts, and build coalitions between fiscal conservatives concerned about corporate welfare and progressives focused on community needs. Several tax packages have been reduced or denied when organized opposition effectively challenged developer claims. If tax breaks are approved, organizers can demand strong clawback provisions (recapturing incentives if promises aren’t kept) and enforceable community benefit agreements with binding terms.

Finally, tax incentives can be changed at any time: in some communities, elected officials who vote for data center tax breaks have been voted out of office, and legislatures, city councils, state economic development agencies, and others are taking a second look and in some cases voting to stop handing out these subsidies.