Data centers drain billions in tax revenue from state

Ohio's state sales tax exemption for data centers is costing the state significantly more in lost revenue than initially projected, with figures reaching $555 million in 2024 and a staggering $1.6 billion in 2025. These actual costs are multiple times higher than the Ohio Department of Taxation's original forecasts, also impacting local sales tax revenue.

Major tech companies like Meta, Google, and Amazon, which are developing large data centers in Ohio, are the primary beneficiaries of this tax break. The department attributed the forecasting inaccuracies to rapid growth in the data center industry and taxpayer confidentiality restrictions that limited earlier data. The exemption allows developers of facilities costing over $100 million to waive up to 100% of the state's 5.75% sales tax for up to 15 years.

Politically, the tax break has become a point of contention. State lawmakers had voted to end the exemption as part of budget legislation, but Governor Mike DeWine vetoed the measure, asserting its importance for attracting data center developers to the state. House Speaker Matt Huffman, a Republican, has indicated a desire to override the veto but lacks the necessary political support. Progressive economist Zach Schiller of Policy Matters Ohio, who had previously questioned the department's low estimates, was surprised by the magnitude of the actual costs.

The broader implications of data center growth, including increased strain on the electric grid, environmental concerns, and the balance of public subsidies against job creation, contribute to the ongoing debate. While the Ohio Chamber of Commerce estimated $2.5 billion in public subsidies between 2017 and 2024, it also cited a $3.7 billion contribution to Ohio's GDP. In response to public pressure, a special legislative committee, chaired by Rep. Adam Holmes, has been formed to investigate the tax break's financial impact, with Sen. Kent Smith noting the exemption's significant cost.