Poll: States should pause or restrict data centers, not offer tax incentives

Eighteen percent of voters say that states should provide tax incentives to attract data centers because they create jobs and investment and 12% said that they were unsure.

The results come from a survey conducted by Noble Predictive Insights from Oct. 5-7 that polled registered voters nationally via opt-in online panel and text-to-web cell phone messages. The sample included 2,527 respondents comprised of 1,011 Republicans, 1,011 Democrats, and 505 Independents. Among independent voters, 220 respondents were classified as true independents, which are individuals who do not lean toward either major party when given the choice. The margin of error is +/- 1.95%.

New hyper-scale data centers and tax policy have become heavily debated across the country and during the current run-up to the Nov. 3 elections.

Groups such as the National Taxpayers Union have shown that state and local governments treat data centers differently than other businesses with some taxing data center servers and components with a personal property tax with 14 states exempting data centers from those taxes.

A recent Tax Foundation report showed that 77.5% of the value of a $1 billion data center are for computers and other equipment.

Data centers also typically employ less people once they are fully operational than other businesses. Data centers operate with one employee per 5,000 square feet while the ratio is one employee per 650 square feet for some distribution centers, a study from Virginia’s Joint Legislative Council found.

States also have debated sales taxes on both electricity and components purchased for the facility as well as the additional costs to provide the electricity needed to operate them.

Many states and municipalities across the country have discussed creating moratoriums to install data center guardrails before approving future projects.

“The problem is, where do data centers fit in that? Are they manufacturing? You know, what are they?” National Taxpayers Union Senior Fellow Jared Walczak recently told The Center Square. “A lot of states didn’t have a ready-made category for that.”

Local governments in some places have also utilized tax increment financing to have additional property taxes at the site of new data centers captured to pay for things such as infrastructure costs to build roads and provide services at the facilities.