Map Shows States Looking to Scrap Tax Breaks for Data Centers
Summary
Many U.S. states are reconsidering tax breaks for data centers because the rapid growth of artificial intelligence (AI) has increased energy and water use, and these incentives now cost more than expected. Some states have paused or ended these tax incentives to study their effects on resources and public finances.Key Facts
- States offered tax benefits like sales tax exemptions and property tax breaks to attract data centers for over ten years.
- The AI boom has increased data center demand, causing higher electricity use and water consumption.
- Arizona, Georgia, Illinois, Michigan, Minnesota, New Jersey, Ohio, and Texas are among states reviewing or cutting data center tax incentives.
- Illinois plans a two-year pause on incentives starting July 1, 2026, to study industry impacts.
- New Jersey ended $250 million in tax credits for data centers in August 2026.
- Some states propose or have introduced bills to eliminate or reduce these tax breaks but have not yet passed them.
- Lawmakers are concerned about electricity grid costs and lost tax revenue from these incentives.
- Ohio paused new applications for its data center tax exemptions in May 2026 during a legislative review.
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