Rhode Island Data Center Tax Plan Faces Cost Warning
Pennsylvania's data center sales-tax exemption is projected to cost the state significantly more than initially estimated, reaching $188.4 million for FY 2026-27. This growing cost provides a cautionary example for Rhode Island lawmakers, who recently considered their own data center tax incentives and proposals to manage electric and water costs. Additionally, an advocacy group has called for a two-year moratorium on new large data center construction in Rhode Island.
The article highlights the escalating financial impact of data center tax exemptions, using Pennsylvania's experience as a cautionary lesson for Rhode Island. Pennsylvania's projected annual revenue loss from its data center sales-tax exemption has more than doubled from an initial $88.6 million to $188.4 million for fiscal year 2026-27, with estimates further rising to $517.2 million by FY 2030-31. This exemption, which took effect in 2022 and was revised in 2021, applies to certified facilities meeting specific investment and job creation thresholds and is currently utilized by approximately 12 data centers in the state.
This widening cost has directly influenced policy discussions in Rhode Island, where senators proposed a broader package of tax benefits for qualifying data centers (Senate Bill 2346), though it ultimately did not pass in the 2026 legislative session. Concurrently, other Rhode Island lawmakers introduced separate proposals, including House Bill 7331 by Rep. Brian Patrick Kennedy and Senate Bill 2776 by Sen. Louis DiPalma, aimed at assigning electric-system infrastructure costs to data centers with demand exceeding 50 megawatts and requiring disclosures about water usage.
Further intensifying the debate, the advocacy group RIPIRG called for a two-year moratorium on the construction of new data centers drawing at least 50 megawatts in Rhode Island. This proposal seeks to allow time for governments to establish comprehensive safeguards around large data center facilities. Nationally, organizations like Good Jobs First have noted that data center subsidies are rapidly growing, with some states facing over $1 billion in annual sales and use tax exemptions. In Pennsylvania, Governor Josh Shapiro's administration has proposed linking future benefits to various environmental, workforce, and community standards, while Pennsylvania Rep. Greg Vitali has advocated for a full repeal of the sales and use tax exemption.