Data center boom prompts Texas to reconsider tax breaks
Texas lawmakers are reconsidering significant tax exemptions offered to data centers, a policy that has led to a projected $3.3 billion loss in state tax revenue amid a boom in data center construction. Both Democrats and Republicans express skepticism, particularly regarding the location of these centers in rural areas. Multiple bills are expected to be proposed in the upcoming legislative session to modify the tax incentive model.
Texas lawmakers are re-evaluating significant tax exemptions for data centers, a policy initiated 12 years ago to attract the industry. The initial law, effective in 2014, saw slow adoption with only 10 data centers receiving exempt status in its first six years.
However, a post-pandemic boom has led to 138 data centers statewide now holding exemptions, with five more pending. This has resulted in a projected loss of $3.3 billion in tax revenue, prompting skepticism from both Democratic and Republican legislators and sparking debate in local and state government meetings.
Governor Abbott, who once supported data centers, has recently become critical, particularly opposing their construction in rural areas. Political analyst Mark Jones of Rice University noted on "Battleground Texas" that this stance is strategic, aiming to secure votes in these red areas. Jones also predicted significant lobbying efforts by tech companies in the upcoming legislative session.
Lawmakers are expected to propose and pass multiple bills in the next session, beginning in January, to modify the existing tax incentive model for data centers.