(The Center Square) – Less than a month after Amazon Web Services announced a $10 billion investment to create new data centers in Ohio, a new report shows sales-tax breaks offered for centers across the state could be costly to taxpayers.
Amazon, Google and Microsoft have all announced plans in the past two years to create new data centers across the state while the state continues to offer sales tax breaks and job creation tax breaks to lure the multi-billion companies and add jobs.
All that, according to a new report from Policy Matters Ohio, could cost taxpayers $1.6 billion in state and local sales-tax revenue and push utility costs higher for Ohioans.
“The Ohio General Assembly needs to rein in this huge giveaway,” said Zach Schiller, report author and Policy Matters Ohio research director. “That’s urgent, since these data centers are also giant users of electricity, so they could drive up electric rates for Ohioans and threaten progress fighting climate change. Why do we want to provide massive subsidies to some of the wealthiest corporations when the result could be higher costs for Ohioans and Ohio businesses?”
Ohio officials said Amazon’s mid-December announcement is expected to create hundreds of new, high-paying jobs by the end of 2023, but the report argues data centers actually create few new jobs.
The planned new data centers are expected to contain computer servers, data storage drives, networking equipment and other forms of technology infrastructure used to power cloud computing, including artificial intelligence and machine learning.
The report estimates that state subsidies often cost $1 million or more for each new job created.
“Because artificial intelligence demands enormous amounts of electricity, these data centers could increase electric rates for Ohioans,” the report reads. “The huge expansion of this industry has other states questioning the wisdom of such giveaways to some of the wealthiest companies in the world. Ohio needs to rein in this giant tax break.”
Other states like Virginia are beginning to debate the value of data centers in terms of energy consumption.
The debate in Virginia persists over the growing number of data centers being built, placing strain on the commonwealth’s energy sources. One report, as reported by The Center Square, says the demand for energy could raise energy costs for consumers by as much as 70%.
The state’s sales-tax exemption covers computer data center equipment and materials used in building the centers. To qualify, a company must make at least a $100 million capital investment over three years and have an annual compensation to employees of at least $1.5 million.