Texas Lawmakers Consider Ending Data Center Sales Tax Exemptions Amid Public Backlash
Texas lawmakers are discussing the repeal or limitation of sales tax exemptions for data centers, driven by public concerns over land use, water supply, and electric grid strain. A recent poll indicates strong voter support for taxing data centers to fund job programs. The governor has also called for data centers to fully fund their electrical infrastructure costs.
Texas lawmakers are currently debating the future of state sales tax exemptions for data centers, which were initially enacted in 2013. This reconsideration comes amid increasing public backlash from constituents concerned about the industry's impact on land use, the state's dwindling water supply, and the strain on the electric grid.
A new poll conducted by Data for Progress found that nearly three-quarters of U.S. voters support taxing AI companies and data centers to fund new job training programs for workers displaced by artificial intelligence, as well as to create new public-sector jobs. This sentiment was echoed during a Texas Senate Committee on Finance hearing, where lawmakers, including Sen. Joan Huffman (R-Houston), expressed openness to repealing or limiting the exemptions, noting their cost has ballooned from $14.6 million in 2014-15 to a projected $3.3 billion by 2028-29.
Gov. Greg Abbott has also weighed in, urging the Public Utility Commission (PUC) and the Electric Reliability Council of Texas (ERCOT) to ensure data centers fully cover the costs of the electric infrastructure needed for their operations. He has also suggested banning data center development in rural areas. While Dan Diorio of the Data Center Coalition highlighted the industry's economic contributions, including 103,000 jobs in Texas in 2024, Sen. Phil King (R-Weatherford) advised the industry to improve its communication with affected communities.