Tax breaks for tech giants’ data centers mean less income for states
In 2019, the Indian Legislative Assembly adopted a bill that would offer significant sales tax exemptions to appropriate data centers. Legislation, facilities full of state -of -the -art servers can avoid 7% tax of the state while purchasing equipment and power, he said.
The measure was a blessing for major technology companies, which rapidly supported data centers and represented the industry to a large extent supported by a trade union.
Similar tax incentives passed elsewhere. Today, almost all states with sales taxes offer exemptions even the energy required to keep all of them working in computers, cables, air conditioning units and in some cases.
The demand for the data center capacity was already rising during the Indiana legislation, but since then, in 2022, Openai has increased exponentially due to the explosion of artificial intelligence fired by Chatgpt. Data Center investment is now expected to reach 1 trillion dollars until 2027Professional Services Network According to PWC.
According to the CNBC analysis, states are losing tax revenue of hundreds of millions of dollars in the racing race of large data centers. Among the beneficiaries of these exemptions, Amazon– Meta And GoogleThey all have market limits above $ 1 trillion.
Tax cuts have long been a tool used by states to compete for businesses. However, the guard groups said this for data centers If the installations are ie, because the facilities are not tend to create a large number of jobs, the amount of electricity required can be enormous.
Increased number of tax reductions launched a debate on whether big companies will receive these generous incentives.
A CNBC analysis determined that 42 provides full or partial sales tax exemption to the data centers of the state or that there is no government sales tax. 37 of them passed the legislation, which gives sales tax exemption, especially for data centers, and 16 of these states were exempted about 6 billion dollars in the last five years. The other 21 states that offer similar breaks are not included in total of $ 6 billion because they do not explain how much they are given in tax cuts. It does not exempt eight state data centers with sales tax.
Only Illinois, Nevada, Missouri and Washington watch how much the company has received by the buyer. For example, CNBC found that a Microsoft data center in Illinois has received more than $ 38 million in data center sales tax exemptions, but only 20 permanent businesses. The technology giant in Washington provided a sales tax exemption of $ 333 million for data centers between 2015 and 2023.
Microsoft refused to comment on tax incentives and business creation due to data centers in two states.
However, other states do not explain in this kind Granular data. For example, Virginia has more than $ 730 million for the 2024 fiscal year, but the state The company was purchased.
Which companies want tax reductions are not always clear. In 2023, a limited company called Hatchworks applied for the sales tax exemption of Indiana. After the award was given, a state filing Hatchworks is a subsidiary of Google.
A Google spokesman told CNBC that the use of a third -party LLC was standard in economic development projects in industries until the project details are finalized.
Greg Leroy, General Manager of Good Jobs First, who monitored corporate subsidies and is the advocates of transparency and accountability in economic development, spent more than a decade by examining the effect of exemptions throughout the country. He said that the open winners are major technology companies.
He told CNBC, “There was a giant transfer of deying from taxpayers to shareholders.” He said. “Some states like Virginia are turning to annual losses of billion dollars.”
Northern Virginia, known as the world’s data center capital, examined the economic impact of data center sales Tax exemptions. A 2024 Virginia joint legislative audit and study committeeOr, on average, Jlarc showed that the state has produced 48 cents in new government revenue for every dollar that it has not collected in sales tax between 2014 and 2023 financial years. He said that most of this income comes from personal and corporate income taxes and sales tax on extensive purchases.
However, according to JLARC, 48 cents are better than other industries, with sales tax exemptions aimed at increasing the economic activity that brings only 17 cents on average than other industries. JLARC is one reason why data center exemption performs a better performance of companies that require companies to create business and other exemptions.
The state’s economic development authority Virginia Economic Development Partnership refused to comment for this story by directing the CNBC to the 2024 JLARC report. In this report, the state classified exemption as a “moderate economic benefit” compared to other incentives, and said that “most of the economic development incentives, as well as the loss income of data center exemption.”
Leroy says an offer lost for taxpayers.
“When tax cuts do not pay for themselves, only two things can be: public services decreases in quality or if you try to keep things the same in terms of the quality of public services, everyone’s taxes rise in other ways.” He said.
Steve Delbianco is CEO of Technical Trade Association NetchioCaHe said some tax revenues were better than ever.
“Let us exempt from equipment purchases to attract more data centers,” Delbianco, representing the major technology companies in Indiana and lobbying on their behalf of them. “And when he did this, he still got half a sales tax, which he thought he had given up.”
For sales tax exemptions, Delbianco is lobbying on behalf of companies such as Meta, Google and Amazon, Delbianco said that data centers are the key driving force of economic growth.
According to the 2024 JLARC report, between 2021 and 2023, Northern Virginia benefited from 50,700 work and 7.2 billion dollars of contributions to the economy. In the same period, the rest of the state produced 12,100 businesses and contributed to the economy of 1.3 billion dollars.
Between 2014 and 2023 fiscal years, the JLARC survey provided more financial benefits than all other economic development incentives for data centers. He said that most of this growth came from the construction phase of the data centers.
Former US representative Barbara Comstock, R-VA., The Virginia Legislative Assembly and the Data Center was a member of the chief deputy behind the sales tax exemption. Now he is a consultant to Netchioice.
2019 in Indiana province The legislative statement Comstock said that he sees exemptions as an important strategy to attract investments, create business and create local tax revenue.
In Indiana, the consumer guard group Citizens Action Coalition said that he followed sales tax exemptions to data centers. The group’s program director Ben Inskeep said that Indiana offers some of the country’s most generous subsidies, including energy and equipment exemption for data centers that invest more than $ 750 million.
Inskeep said that when the sales tax exemption was adopted in 2019, MPs did not foresee that major technology companies would create major data centers and thus receive billions of dollars tax reductions. He said that the facilities have created very little work.
A 2017 Report US Chamber of Commerce “He said that 10 major business and service providers with 244 large data centers in 16 states are looking at the financial data. During the construction phase, the data centers found an average of 1,688 workers. However, they only provide 157 permanent jobs after working.
Compared, 2020 Study Between 2002 and 2017, a aviation and automobile manufacturers, which were unique to the company between 2002 and 2017, found that more than 2,700 jobs promised. However, contrary to data center figures reflecting the real employment average, aviation and automobile job numbers are based on company projections affiliated to incentive agreements.
“Although we find some evidence of direct employment gains from attracting a firm, we cannot find strong evidence that tax incentives increase the economic growth at the state and local level.”
Then there is power. The Virginia control was expected to have provided a “tremendous increase in energy demand”. The study foresees that the demand for power in Virginia would double in the next 10 years due to the data center industry.
The report said that one of Virginia’s smaller data centers uses the same amount of energy as 4,500 houses, and most of the largest new data centers uses more energy than industrial consumer..
In the report, although data centers in the state are currently paying full service costs, the tension on resources is likely to increase the costs paid by other customers.
CNBC has contacted Amazon, Apple, Google, Meta, Microsoft, Openai and Oracle.
Amazon, Google, Meta and Microsoft said that they are working with public services companies to ensure that they meet the growth costs required to meet their data center needs.
Amazon, Google and Microsoft, wind, sun and nuclear energy, such as carbon -free and sustainable energy sources, they also invest, he said.
An Amazon spokesman said incentives play a key role in the withdrawal of data centers and require companies to meet strict investment and business creation criteria.
Amazon also added that he added $ 460 million for data centers in 2023 in the district of Virginia, and he has invested more than $ 75 billion in the state since 2011.
Apple, Openai and Oracle did not respond to multiple comments.
