Virginia Lawmakers Debate Data Center Tax Exemptions Amid Billions in Lost Revenue

A new report by the watchdog group Good Jobs First reveals that Virginia's sales tax exemption for data centers is projected to cost the state nearly $2 billion in lost tax revenue for fiscal year 2024. Greg LeRoy, executive director of Good Jobs First, criticizes the exemption, which was enacted in 2008 to attract data centers and create jobs, arguing that lawmakers did not foresee the massive facilities required for artificial intelligence, with construction costs soaring from $50 million to $5 billion per data center. LeRoy contends that these multi-trillion dollar companies do not pay their fair share of taxes. The findings have sparked a serious push in Richmond to alter the current policy. Virginia State Senator Russell Perry, representing Loudoun County, which hosts a significant concentration of data centers, highlighted the exponential increase in foregone tax revenue, far exceeding the initial estimate of $1.5 million annually. Lawmakers are currently split on the path forward. The Virginia Senate is advocating for the complete elimination of the sales tax exemption. In contrast, the House of Delegates proposes retaining the exemption but contingent on data centers adhering to strict new environmental standards. Additionally, Arlington Senator Barbara Favola, a member of the Finance Committee, is championing an alternative proposal: implementing fees based on the electricity and water consumption of data centers to ensure they contribute equitably. She believes there is growing consensus for a model that ensures data centers pay their fair share.