Marketplace All-in-One How states are competing in the data center gold rush
Dec 16, 2025
Nicholas Miller, a policy associate at the National Conference of State Legislatures, dives into the booming data center industry driven by AI investment. He reveals how 37 states are rolling out lucrative tax incentives, hoping to attract these billion-dollar facilities. Miller explores which incentives are most effective, discussing upfront tax exemptions and energy benefits. He also outlines what states expect in return—jobs and capital investment—while highlighting the evolving landscape of energy regulations as states reassess these incentives.
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States Are Aggressively Incentivizing Data Centers
- Thirty-seven states offer sales and use tax incentives to attract data centers, with some exemptions extending to electricity and partial property-tax abatements.
- These incentives can total hundreds of millions annually, exemplified by Virginia awarding about $980 million in FY2023.
Upfront Exemptions And Energy Matter Most
- Upfront exemptions include taxes on computers and even construction materials, and electricity exemptions matter because data centers have huge energy demands.
- Virginia, Texas, and California host most data centers, while some states use workforce grants to compete.
Big Construction Jobs, Few Long-Term Positions
- Data centers create many construction jobs during build-out but far fewer permanent operational jobs, often just 20 to 50 employees.
- Long-term fiscal appeal often rests on high property values and property tax revenues from expensive facilities.