Texas Data Center Sales Tax Break Becomes Political Issue
Controversies over data centers are emerging in Delaware and Texas. In Delaware City, a proposed Project Washington data center faces calls for a moratorium due to plans for 500 diesel generators. Meanwhile, in Texas, a significant data center sales tax exemption, now valued at $3.3 billion, has become a political issue in the gubernatorial race, while Tom Green County officials backed away from a moratorium plan over legal concerns.
Controversies surrounding data center development are escalating across the United States, including in Delaware and Texas. In Delaware, a proposed Project Washington data center in Delaware City has prompted calls for a moratorium, primarily due to developer plans to install over 500 diesel generators for backup power within the state's coastal zone, a move opposed by the Delaware Department of Natural Resources and Environmental Control.
The data center boom has also created unexpected challenges in Texas, a state known for its business-friendly environment. Worried officials in Tom Green County reportedly reconsidered a planned moratorium on data center development, fearing potential lawsuits from developers over property rights. A key contentious issue in Texas is a state sales tax exemption on servers and other computer equipment for data centers, originally passed about a dozen years ago.
This tax break, which initially amounted to $14.6 million, has now grown to an estimated $3.3 billion in potential lost sales tax revenues, based on approved data center sites. This financial implication has propelled the issue into the political arena, with Democrat Gina Hinojosa highlighting the tax break in her campaign for governor against incumbent Greg Abbott. Additionally, the need for new high-voltage power lines to support data centers and their impact on private property rights is an ongoing concern, coupled with local counties expressing limited control over data center developments.