Is Washington state less competitive if data center tax break is repealed?

The Washington State Legislature has approved Senate Bill 6231, which repeals a sales tax exemption for data centers on their computer equipment and installation. This tax break, in place since 2010, was designed to attract the data center industry and has been credited with boosting rural economies, particularly in Central Washington where companies like Yahoo and Microsoft have established facilities. However, Democratic Sen. Noel Frame, the bill's prime sponsor, stated the legislation was requested by the Office of Financial Management to address budget shortfalls, emphasizing it was a tax policy decision rather than a stance on data centers themselves. Industry representatives, including Dan Diorio, Vice President of State Policy with the Data Center Coalition (DCC), voiced strong concerns, calling the repeal a "self-inflicted hit to the state's economy." Diorio argued that it makes Washington less competitive compared to other states offering similar incentives, potentially deterring future investment and job creation. The DCC, along with other industry and labor groups, sent a letter to lawmakers highlighting that data centers support over 47,000 jobs and generated approximately $1.8 billion in local and state tax revenue in 2023. On the other hand, concerns about data centers' impact on the state's power supply and environment were noted. Sen. Sharon Shewmake, Chair of the Senate Environment, Energy & Technology Committee, pointed out that Washington's hydropower system is nearing its maximum capacity, necessitating more transmission and renewable resources. Shewmake believes data centers should contribute equitably to the grid, though she also acknowledged the tax incentive repeal was a budget necessity. Another related bill, House Bill 2515, which sought to impose additional restrictions on data centers, ultimately failed but is expected to be refined and reintroduced next year. Sen. Matt Boehnke, a Republican, echoed industry concerns, warning that the legislative actions send a negative signal to innovators.