The $327 Million Guess That Became $2.5 Billion: States Are Finally Learning What Data Center Tax Breaks Cost
Four states now lose more than $1 billion a year to data center sales-tax exemptions — and every one of them originally projected a fraction of that. Georgia revised its estimate up 664% in one January. Ohio's real cost came in at 12 times its projection. Indiana admitted 83% of its subsidy went to one company: Amazon. Fourteen states still won't publish a number at all. Here's what the June 2026 Good Jobs First report found, and what it means for the fiscal-note fight in your county.
A headline crossed our news feed this week — "Data Center Tax Breaks Promised 'No Significant Fiscal Impact': States Are Losing Billions" (Tech Times, August 3). The story behind the headline is a June 2026 report from Good Jobs First, the subsidy-watchdog group, with the memorable title Even Cloudier with a Greater Loss of Spending Control (Kasia Tarczynska). It is the most complete accounting yet of what data center tax exemptions actually cost states — and the pattern it documents is the same one we keep finding in capacity markets and ratepayer fights: the original estimate is always wrong, and always wrong in the same direction.
The tire and the chip
The report opens with the cleanest explanation of this subsidy we've seen. When General Motors buys an $80 tire to build a car, it pays no sales tax — correctly, because GM isn't the end user; the car buyer pays tax on the whole car at the dealership. But when Amazon Web Services or Google buys an Nvidia AI chip for $30,000–$50,000, in 37 states it also pays no sales tax — even though the data center is the end user. There is no downstream consumer purchase where the tax gets collected. It's simply gone. Multiply by tens of thousands of chips per hyperscale campus — plus servers, generators, cooling systems, and in some states electricity and building materials — against an industry that spent roughly $375 billion on AI infrastructure in 2025 and has slated about twice that for 2026.
Every estimate was wrong, and all in the same direction
What makes the report unusual is that it isn't projections — it's the record of what happened when states finally checked:
- Georgia projected its data center exemption would cost $327 million in FY 2026. In January 2026 it revised that to $2.5 billion — a 664% increase — and projected almost $3 billion for FY 2027. Three-year cumulative cost, 2025–2027: $7.3 billion.
- Ohio initially projected $135.8 million. In May 2026 the Department of Taxation revealed the real 2025 cost: $1.6 billion at the state level alone — 12 times the projection — after $555 million in 2024. Days after the numbers became public, Gov. Mike DeWine paused the program for new applications. (Existing contracts keep their breaks.)
- Indiana didn't disclose at all until Good Jobs First called it out in April 2026. It then admitted to $655.6 million in cumulative losses — and that 83% went to a single company, Amazon: $50.5 million in 2024, then $561 million in 2025, a 1,011% one-year increase to one firm.
- Texas projects $1.3 billion for FY 2026, rising to $1.75 billion by FY 2030 — a cumulative $9 billion between 2025 and 2030.
- Virginia's exemption cost $136 million in FY 2022. For FY 2025, counting state and local losses, it's $1.94 billion — a fourteen-fold increase in three years.
- North Carolina's 2015 fiscal note projected $4 million a year. Current estimates: $45–57 million annually — and if planned projects are built, an additional $1.5–2.3 billion during construction. Gov. Josh Stein's own words: "When this tax break was enacted in 2006 and then widened in 2015, we lived in an entirely different world."
- Wisconsin's number only exists because a state senator forced the Legislative Fiscal Bureau to produce it: $1.5 billion during construction of four planned projects, then $269 million a year.
- Smaller programs are blowing out at the same rate: Pennsylvania up 180% in one year ($41M → $114.8M), Arizona up 98% ($19.4M → $38.5M).
The report's summary of the mechanism: these exemptions were written for an era of small server rooms, and are now being claimed by $50-billion hyperscale campuses under the same statutes. Most programs have no caps, no sunset dates, and — critically — no requirement that companies report how much tax they avoided. States are guessing, and the guesses are systematically low.
Fourteen states won't publish a number
Per Stateline's coverage (Kevin Hardy, April 2026), fourteen states with data center exemptions disclose no aggregate cost at all: Alabama, Arkansas, Idaho, Iowa, Indiana*, Louisiana, Maryland, Mississippi, Missouri, North Carolina, North Dakota, Oklahoma, South Carolina, and Utah. Good Jobs First argues this violates Governmental Accounting Standards Board reporting standards for tax abatements. As executive director Greg LeRoy put it: "No form of state spending is more out of control today than data center tax abatements."
*Indiana disclosed after the April report — see above.
The local layer is worse-documented still. Sales-tax exemptions granted by states silently drain local budgets too: Georgia localities are projected to lose $1.1 billion in 2026 and $1.4 billion in 2027. And that's before local property-tax abatements — in Oregon, data centers owned by Amazon, Apple, Alphabet, and Meta collected $616 million in property tax abatements between 2016 and 2025, with annual costs up 762% over the period.
The turn has started
The same report season produced the fastest wave of subsidy pullbacks this industry has seen:
- Ohio paused its program for new applicants (May 2026).
- Illinois' governor called for suspending the exemption; the state hasn't disclosed annual losses since 2023 ($361 million).
- Maine approved the country's first statewide moratorium on data centers over 20 MW, through November 2027.
- North Carolina is moving to phase out its exemptions.
- Oklahoma passed ratepayer protections; New Jersey froze a program; Arizona paused incentives.
Good Jobs First's own recommendation goes further — end the subsidies, or at minimum impose moratoriums until costs are known, and add caps, sunsets, transparency requirements, and construction-phase-only eligibility to anything that survives.
What this means at your county hearing
Every one of these numbers started as a fiscal note that said "no significant impact." That's question 13 on our 26-question checklist: demand the tax revenue projection after all abatements, signed by an independent economist — not the developer. This report is the evidence for why that demand is reasonable. When the official estimates in Georgia, Ohio, and North Carolina were off by 8×, 12×, and 14×, "trust the fiscal note" is not a plan.
Three GridWatch tools pair with this story:
- Your bill, explained — how data center load shows up on residential electric bills, the other half of the subsidy story.
- Data dividend calculator — what a revenue-sharing deal would look like if your community negotiated one instead.
- PUC directory — where to file comments in your state.
If a developer's pitch deck says the tax break "pays for itself," ask which of these ten states' fiscal offices reviewed the math. The answer so far, everywhere anyone has checked, is that nobody did.