Wisconsin's data center tax break costs state more than $2 billion in lost revenue

Wisconsin is facing a potential loss of over $2 billion in sales tax revenue due to a state budget provision from 2023-25 that granted sales tax exemptions for hyperscale data centers. This incentive was designed to attract economic development, leading to projects by companies like Meta, Microsoft, and Epic in cities such as Beaver Dam, Mount Pleasant, Port Washington, and Verona. Initially, the nonpartisan Legislative Fiscal Bureau did not estimate the full financial impact of the exemption. However, new projections indicate the state will forgo $1.5 billion in sales tax revenue during construction and an additional $369 million annually once facilities are operational. Economists like Ross Milton from the University of Wisconsin-Madison suggest these data centers might not have been built in Wisconsin without such incentives, citing fierce competition among states for development. Despite the economic benefits highlighted by groups such as the Wisconsin Data Center Coalition, the significant forgone revenue has intensified efforts for data center regulation. State Sen. Jodi Habush Sinykin, D-Whitefish Bay, who requested the fiscal estimate, is advocating for an extraordinary legislative session to discuss potential requirements, such as environmental protections, in exchange for the tax exemption. Previous legislation for the exemption received substantial lobbying support from tech giants and power companies like We Energies and Alliant Energy. Nationally, there's a growing trend from incentive-focused data center legislation towards regulation, with states like Minnesota restricting sales tax exemptions. Shawn Haney, a data center opponent from Dane County, also supports modifying the tax break to allow the state to collect some sales tax revenue.