Data center tax breaks paused as lawmakers study impact

Critics have said the state is being overrun by new and proposed data centers, which threatens to overwhelm the power grid and water supply in the state and tax away valuable revenue from the state and local communities.

DeWine’s move comes less than a week after Democrat State Sen. Kent Smith, from the Cleveland suburb of Euclid, called for an immediate end to tax exemptions for data centers, citing a new report that said the centers are costing the state 10 times more than was projected in 2025.

The Ohio Department of Taxation report estimated in 2024 the state would lose $135.8 million in revenue to data center tax exemptions. The actual cost, according to the department, was more than $1.5 billion for 2025 and more than $500 million in 2024.

DeWine, however, praised the value of data centers, even while imposing a pause on new tax exemptions.

"Data centers are a critical component to today's technology-driven economy, which depends on the virtual, large-scale exchange of information,” the governor said in a statement. “One of the reasons Ohio has been so successful in attracting new businesses and creating new jobs is that we have invested in the data infrastructure needed to support complex technological innovation.”

In 2023, data centers that had previously been granted sales and use tax benefits in Ohio reported a total capital investment of $27.2 billion, DeWine said.

The governor, however, praised a legislative study committee that is examining data centers in 2025.

"I fully support the Ohio General Assembly's work to study the issue and bring forward facts about data centers, including the local benefits to communities when tax exemptions are granted.” DeWine said. “As this work is ongoing, I believe it is appropriate for the Ohio Tax Credit Authority to pause its consideration of new data center tax exemptions while the full impact of data center growth in Ohio is being reviewed.”

The Ohio Tax Credit Authority will consider a data-center exemption at its meeting on Monday but will then “stop accepting” new data center tax exemption proposals, DeWine said.

“This action only suspends the ability for data centers to request tax exemptions in Ohio; it is not a data center ban,” DeWine said.

The Ohio Chamber of Commerce, however, expressed disappointment in the governor’s decision.

“With all surrounding states having incentives in place to lure data centers that are comparable to or more expansive than our own, Ohio cannot afford to forfeit the transformational economic gains this industry yields,” the chamber said in a statement. “That’s why we are disappointed to learn of the recently announced pause on the sales and use tax exemption for data centers.”

Mathew Putnam, policy manager with the non-profit National Taxpayers Union said Ohio’s pause of new sales and use tax exemptions for data centers is “myopic” because other states will continue to offer them, possibly putting Ohio at a competitive disadvantage.

“So many states have these exemptions,” Putnam told the Center Square. “The entire purpose is to partially bring in these businesses.”

Ohio is currently sixth in the nation in the number of data centers, Putnam said.

“That will probably fall if they keep this [tax increase] moratorium in place very long,” he said.

On Wednesday, however, Wisconsin’s Dane County board announced it is considering an 18-month moratorium on what it calls hyperscale data centers including applications, zoning permits or citing in the county that includes the state capital of Madison.

The board said that the resolution was allow for time to look into the complex issues surrounding the projects. 

Economist JC Bradbury, from Kennesaw State University, wrote Thursday that pushback against data center tax breaks nationwide have come not because data centers are bad or unnecessary but because those pushing the projects have asked for and received special tax treatment.

“Pundits are asking why data centers are so maligned,” Bradbury wrote. “Well, when the transparently bogus economic promises your hired lobbyists made about these big ugly buildings fall flat, in order to obtain rent-seeking spoils, you're going to get some harsh blowback.

“It's time for a new data center PR strategy. Come clean and admit you're just like any other private business. Stop asking for handouts, and people will start treating you like a legitimate industry. Try normal capitalism, not crony capitalism.”