Virginia witnessing a data center boon. Officials debate prudence of tax breaks

Nearly two decades ago, Virginia gave tech companies a tax break on equipment and software, which led to a data center building boom in the state. However, this growth has faced opposition from residents concerned about noise and strain on the power grid. Now, the Virginia Senate has voted to end the $1.6 billion annual tax break, requiring the data center industry to resume paying a minimum 5.3% sales tax. This proposal has left some opponents warning it would bring data center construction to a halt in Virginia. The Data Center Coalition, representing tech giants, said the tax would "effectively halt investment" in the state. The debate in Virginia reflects a growing nationwide pushback on data center tax breaks, as communities fight data center projects and lawmakers consider reducing or eliminating the incentives. Other states like Minnesota, Washington, and Arizona have moved to curtail or impose new conditions on data center tax breaks. However, the data center industry has proven adept at lobbying in state legislatures, and Virginia's House Democrats are pushing to keep the tax breaks in place, sparking infighting with state senators.