Wisconsin data center tax break to cost state more than $2B

The state of Wisconsin is poised to forgo more than $2 billion in sales tax revenue due to an exemption designed to attract hyperscale data centers, a policy now under increased scrutiny. The 2023-25 state budget, approved by the Republican-controlled Legislature and Democratic Gov. Tony Evers, granted a sales tax exemption on purchases for constructing and equipping data centers, impacting projects by companies like Microsoft and Meta in locations such as Beaver Dam, Mount Pleasant, Port Washington, and Verona. A recent projection from the nonpartisan Legislative Fiscal Bureau reveals the state will be out $1.5 billion in forgone state sales tax revenue during construction, plus an additional $369 million annually once these facilities are operational. This substantial financial impact was not initially estimated when the budget passed in July 2023, due to the uncertain scale of the data center boom. Economist Ross Milton of the University of Wisconsin-Madison suggests this isn't revenue the state would have realistically captured, arguing that data centers would likely not have been built in Wisconsin without such incentives, reflecting fierce competition among states. Conversely, Tricia Braun of the Wisconsin Data Center Coalition and Jason Stein of the Wisconsin Policy Forum highlight economic benefits not accounted for in the fiscal bureau's projection, including taxes from suppliers, construction workers, and permanent data center employees. The unexpectedly large amount of forgone revenue has intensified efforts for data center regulation. State Senator Jodi Habush Sinykin, who requested the fiscal estimate, is advocating for an extraordinary legislative session to discuss various data center bills, proposing that exemptions could be linked to requirements like environmental protection. Nationally, there's a noticeable shift in state legislation from offering incentives to imposing regulations concerning energy, environment, and transparency, a trend echoed by local data center opponent Shawn Haney, who urges modifications to the exemption.