States and localities racing to attract new data centers are forgoing billions of dollars in tax revenue, allowing some of the world’s richest tech companies to avoid paying into the communities in which they are expanding.
A new report from Good Jobs First, a group that advocates against public subsidies for private businesses, found at least 10 states are missing out on at least $100 million in revenue by allowing tax exemptions for data centers. And, the report found, many states are experiencing ballooning costs as data centers grow in size and complexity.
“We know of no other form of state spending that is so out of control,” the report’s authors wrote.
Subsidy programs in Texas, which exempts data centers from paying sales and use taxes including on the costs to power data centers, cost the state more than $1 billion in 2025, according to the state Comptroller’s Office.
In Virginia, the state reported losing $732 million in subsidies in 2024. But that does not include millions more that local governments lose out on when data centers are exempt from taxes; a one-time study found data centers were exempt from nearly $930 million in state, local and regional sales taxes in Fiscal Year 2023.
Illinois forwent $370 million in state and local sales taxes in 2023. Georgia estimated it will give out $296 million in sales tax exemptions this year. Iowa, Minnesota, Nevada, Ohio, Washington and Tennessee have all reported more than $100 million in exemptions.
Total state spending on data center subsidies is likely much higher, Good Jobs First said. Thirty-two states offer such incentives, but 12 of those states do not disclose how much the subsidies cost. States like North Carolina, Utah and Indiana have all attracted new data centers in recent years without reporting program costs.
Data center industry experts said the state subsidies are necessary to bear the costs of such massive projects. The industry supports 4.7 million jobs and contributed $162 billion in tax payments, according to the Data Center Coalition, the main trade group supporting data center operators.
“Data centers involve significant financial investments in buildings and equipment, with some individual projects representing billions in capital investment,” Josh Levi, president of the Data Center Coalition, said in an email. “[T]he availability of sales and use tax exemptions on data center equipment is a critical factor for the industry in considering markets to locate and expand.”
Levi said 41 states already extend sales and use tax exemptions to manufacturers. He pointed to reviews from tax commissions and academics that show 90% of data center investments would not have occurred without tax exemption programs.
The report found that the data center industry is growing so rapidly that states are having a difficult time accurately estimating the costs associated with new subsidies. The Texas Comptroller’s office initially projected state subsidies would cost $130 million during the current fiscal year, before twice raising projections, ultimately to more than $1 billion.
By 2030, the Comptroller estimates data centers will receive $1.7 billion in subsidies, and a total of $9 billion between now and 2030.
Virginia’s estimated costs ballooned five-fold during Fiscal Year 2022, from an initial estimate of $81 million to $411 million. Illinois spending on data center subsidies rose from $10 million in 2022 to $370 million in 2024.
The ballooning costs show “there are no caps on how much any facility or company can benefit from the tax breaks, or how much any state can lose in a given year,” the report said.
Some states have already taken limited steps to cap the cost of data center subsidies. Georgia lawmakers last year approved a bill to pause data center incentive programs, but Gov. Brian Kemp (R) vetoed the bill. Washington Gov. Bob Ferguson (D) this year created a new task force to study how data centers impact tax revenue.
In Virginia, Sen. Danica Roem (D) has for the last two sessions introduced measures to improve disclosure of data center energy use, and to protect ratepayers from higher energy costs that occur when data centers consume power. Virtually all of those measures failed.