Wisconsin data center tax break to cost state more than $2 billion

A 2023 sales tax exemption implemented in Wisconsin for data centers is now projected to cost the state more than $2 billion in lost revenue. The measure, approved by the Republican-controlled Legislature and Democratic Gov. Tony Evers as part of the 2023-25 state budget, aimed to attract economic development by exempting data centers from the 5% state sales tax and local sales taxes on construction and equipment purchases. The nonpartisan Legislative Fiscal Bureau initially provided no specific cost estimate when the budget passed. However, new projections indicate the state will forgo $1.5 billion in state sales tax revenue during the construction phase of these facilities, with an additional $369 million annually once they are operational. This estimate applies to major hyperscale data centers under construction or planned in Beaver Dam, Mount Pleasant, and Port Washington, as well as a smaller Epic project in Verona. The significant fiscal impact is prompting scrutiny, though some argue the tax break is essential for attracting such large-scale investments. Ross Milton, a state government tax expert at the University of Wisconsin-Madison, noted that this revenue likely wouldn't have been captured otherwise, as Wisconsin would not see these data centers built without such incentives, highlighting the fierce competition among 38 states offering similar tax breaks. Tricia Braun, executive director of the Wisconsin Data Center Coalition, a business advocacy group, emphasized that the fiscal bureau's projection does not account for the broader economic benefits generated by data centers, including taxes paid by their suppliers. Wisconsin Watch reported in March that just three state companies have already conducted over $1 billion in business supplying data centers.