- Texas has been losing more and more each year due to lack of data center tax
- Previously just a few million, the state could lose $1.3 billion in 2026 alone
- Supporters say the benefits include large investments and other tax revenues
The state of Texas could be set to lose $3.2 billion in sales tax revenue over the next two years because of a longstanding tax exemption in place for data centers — one of the most expensive incentive programs in the state.
But this figure is a general estimate, and growing data center construction could actually mean even more treasure is lost.
In addition, the number has grown significantly in recent years, leading to about $1.3 billion in exemptions by 2026, compared to about $150 million annually in 2023 and 2024 and $5-30 million annually between 2014 and 2022.
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Tax breaks for Texas data centers are getting more expensive than ever
Speaking of the lost income with Texas Tribuneexplained state senator Joan Huffman: “These new numbers are extremely concerning and I would say they are unsustainable.”
Lawmakers are now questioning whether the tax breaks remain sustainable and are exploring whether they should be scaled back or eliminated altogether. “I plan to look at the filing legislation to either repeal the exemption or take a very close look at it and see,” Huffman added.
Billions in lost revenue now prevent public funding for services like schools and disaster recovery.
However, Texas’ position as one of the most generous states in terms of taxes has resulted in large projects being located in the state, including OpenAI’s Abilene campus under the Stargate Project. Four of Stargate’s data centers were expected to create 25,000 on-site jobs—two of those centers are located in Texas.
Supporters of the scheme argue that the tax incentives attract large investments like the above and generate other tax revenues.
Other states with tax incentives for data centers, including Virginia, Illinois, Michigan, Arizona and Georgia, are also reportedly exploring future options amid sustainability concerns.
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