Report: Wisconsin could make up taxes lost to data center incentives
A new report from the Wisconsin Policy Forum evaluates the economic impact of data centers in Wisconsin, focusing on tax incentives, water usage, and electricity demands. While the state offers significant tax exemptions to attract data centers, the report suggests these losses could be recouped through other taxes. It highlights electricity demand as a greater challenge than water use, noting public unpopularity has led to some project cancellations.
The Wisconsin Policy Forum has released a report analyzing the economic and environmental impacts of data center development across the state. The report, co-authored by Jason Stein and Tyler Byrnes, provides context to Wisconsin's ongoing data center debate, examining tax incentives, energy, and water usage.
Wisconsin's state law offers sales and use tax exemptions for data center construction and operation, which the Legislative Fiscal Bureau estimates will result in a loss of $1.5 billion in sales tax revenue between 2024 and 2028, and $369 million annually from operations. Despite these figures, the report suggests the state could recoup a significant portion of these forgone revenues through income and sales taxes paid by workers and construction companies, as well as increased property taxes and utility taxes.
While public concern has often focused on water use, the report indicates that meeting the substantial electricity demands of data centers is the more pressing challenge. Water withdrawals in Wisconsin have significantly declined over the past generation, and even major data center projects, like Microsoft's campus in Mount Pleasant, are projected to use less water than this overall decline. However, electricity demand from data centers is projected to drive a substantial increase in peak grid demand, from 14.6 gigawatts in 2024 to 19.9 gigawatts by 2030.
The state Public Service Commission has already modified rate proposals from utilities like We Energies and Alliant Energy to protect residential customers from data center-related costs. However, unresolved questions remain regarding transmission rates, which are set federally, and the need for a statewide framework for data center electric rates. The report also highlights that public opposition has led to the cancellation of several proposed data center projects in communities like DeForest, Greenleaf, and Janesville.