(The Center Square) – Sales tax exemptions for data centers cost the state of Wisconsin $40 million in tax collections last fiscal year, exceeding Department of Revenue projections from when the exemptions were enacted in the 2023-25 budget.
The exemptions came from the three yet-to-be-completed Wisconsin data centers who have been registered with the state, including Microsoft’s first data center on the former Foxconn property in Mount Pleasant, Epic Hosting’s data center in Verona and a Degas LLC data center in Beaver Dam that only because eligible on Feb. 18 for the incentives.
The sales tax exemptions are good for equipment, construction materials, electricity and more at qualified data centers in the state.
The original bill estimated the value of the incentives would be $8.5 million for the full multi-year construction of a facility and $735,000 recurring afterward.
But those numbers have already been significantly exceeding for, as Good Jobs First Senior Research Analyst Kasia Tarczynska said, more projects have appeared, construction and technology costs have increased and the energy required by the data centers has multiplied.
“The state budget accounted only for regular data centers, not hyperscale like the Microsoft one you have in Wisconsin,” Tarczynska told The Center Square. “Therefore, the cost estimates in the tax expenditure report might be way higher than what they predicted in the budget in 2023. It’s safe to assume that most of that lost revenue went to Microsoft.”
That comes as Microsoft announced last week that it would be building a second $4 billion data center in Kenosha County.
The first Mount Pleasant data center is located within a tax increment district and those funds may be available for Microsoft to use on the second project, which could also end up in a TID.
The tax captures and exemptions have caused some to question the benefits of the six mega data centers being built in the state, many of which are part of TIDs.
Voters across the U.S. have said they don’t want data centers built in their community and even more oppose the data centers if tax incentives are awarded to have them built, according to a poll by Libertas Network.
Menomonie found that out first-hand before Mayor Randy Knaack announced on Monday night during a council meeting that he sent a letter to Balloonist Inc. stating that Knaack was not “currently interested in pursuing the tax increment district or development agreement” for a $1.6 billion data center in the community.
Knaack called it a “bold move” and said “to me, your voice does matter” to the audience at the meeting.
Wisconsin legislators provided a pair of TID cap exceptions for data centers in Port Washington and Beaver Dam that were signed into law by Gov. Tony Evers.
Rep. Robert Brooks, R-Saukville, explained during a public hearing on the bill that the at least $2 billion Port Washington data center would exceed the $1.7 billion value of all other property in Port Washington by itself, saying he hoped it would be a short-term TIF.
The Port Washington TID proposal expects to collect $175 million that will pay for infrastructure on the property.
“This generational development could potentially be as large as 1,900 acres and bring high-paying jobs and large capital investments to the community and the state of Wisconsin,” Sen. Dan Feyer, R-Fond du Lac, said when the TID exception was proposed. “An investment of this magnitude is good for all Wisconsinites. Along with other data centers, this could be a launching pad for more investment and technology advancement right here in Wisconsin.”
The projects also have heavy requirements of water for cooling and electricity. The first Mount Pleasant data center and Port Washington combined will require far more electricity than every Wisconsin household combined, according to Clean Wisconsin.
