States competing for data centers extend $1.5B in tax breaks

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States competing for data centers extend $1.5B in tax breaks
David Lieb – Associated Press

The former limestone mine seemed perfect for a large computer data center. The air was cool. The rock walls provided a defense against natural disasters. And the tunnels bored into a Kansas City hillside had access to abundant electricity and fiber-optic cables.

But the mine lacked something important: tax breaks. Without them, several companies chose instead to locate their data centers in neighboring Kansas. At least one major project opted for North Carolina.

“There were people who wouldn’t even come and look,” said Ora Reynolds, president and chief executive of Hunt Midwest Enterprises Inc., which has been marketing its SubTropolis caves. Financial incentives, she learned, were “absolutely crucial.”

Similar competitions for business are playing out across the country as states increasingly offer lucrative tax breaks to attract the data centers that function as the brains of the Internet. An Associated Press analysis of state revenue and economic-development records shows that government officials extended nearly $1.5 billion in tax incentives to hundreds of data-center projects nationwide during the past decade.

The actual cost to taxpayers is probably much higher because some states refused to disclose the amount of taxes they waived, citing confidentiality laws. In many cases, cities and counties sweetened the incentives by forgiving millions more in local taxes.

The benefits are debatable. Although they cost hundreds of millions of dollars to build and equip, the centers employ relatively few workers. That means they produce little in the way of new income taxes but could provide a surge in property and sales taxes — if governments don’t waive those taxes, which many do.

Some officials doubt the tax breaks are worth it because they typically benefit a single community while depriving the state budget of money that might otherwise help schools, lower the cost of college tuition or pay for roads and other infrastructure. Go to AP.org for more…

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