EN
Across the country, states are locked in a fierce competition to attract data centers, the massive facilities that house servers for cloud computing, artificial intelligence and digital services. These facilities promise investment, jobs and economic development. But the way states subsidize them has raised legitimate concerns about the long-term costs and sustainability of such incentives.
In many states, incentives offered to data center developers have grown far beyond what legislators likely anticipated. In Virginia, for example, state incentives, particularly sales and use tax exemptions for data center equipment, have ballooned into the billions. Recent legislative reports show more than half of Virginia’s economic development incentive spending over the past decade went to data centers, with these facilities avoiding around $1.6 billion annually.
That growing cost has triggered pushback. In early 2026, the Virginia Senate advanced a proposal to phase out sales tax exemptions for data centers, reversing nearly two decades of generous treatment in response to concerns about environmental impacts, energy consumption and foregone revenue. Another legislative amendment would sunset the data center tax credit even sooner, highlighting bipartisan frustration with the size of these breaks, which some estimates place at well over $1 billion annually.
The situation isn’t unique to Virginia. Many states don’t even disclose how much they’re spending on these incentives or which companies receive them, making fiscal oversight difficult. A watchdog study found that at least 36 states have incentives crafted for data centers, but only a small number make recipients or amounts transparent.
In Arizona, a fast-growing data center market, these subsidies have skyrocketed, prompting the state to question whether the long-term benefits outweigh the immediate tax breaks.
In Ohio, there have been multiple bipartisan efforts to roll back data center incentives in the past year, reflecting broader unease about what unrestricted data center spending could mean for infrastructure, services and local budgets.
Subsidies like tax exemptions and abatements are not free money. They are revenue that states forego today in hopes of economic activity tomorrow. When those incentives grow large, as they have with data centers, the trade-offs become starker:
Lost tax revenue limits budget flexibility. When billions in sales tax revenue are shielded from collection, states have less funding for schools, health care, infrastructure and other core services.
Higher risk in the event of a recession: Less budget flexibility means that states have a reduced ability to respond to budget hits, like recessions or even federal legislation.
Transparency issues obscure true costs. Without clear reporting on who benefits and how much is forgone, policymakers and the public lack the data needed to evaluate whether incentives deliver promised returns.
In Colorado, these risks are more severe, because once we give an incentive, we cannot take it away. The Taxpayer’s Bill of Rights, or TABOR, limits the ability of the state Legislature to raise revenue, even if it means repealing or limiting an existing tax expenditure.
For Colorado, the lesson should be clear: We must be cautious about embracing large tax breaks for big tech infrastructure without robust analysis of long-term costs and realistic expectations about benefits. Under TABOR, we can’t easily unwind incentives if they end up burdening our budget or distorting priorities. That makes disciplined fiscal policy and sober evaluation of subsidies not just good practice, but essential to Colorado’s financial health in the decades ahead.
Colorado is at a turning point. As data center development expands, so do the risks to our communities, from rising energy demand to water use and pollution. Right now, Colorado communities have no protections in place to hold large tech companies accountable for these impacts.
At the Capitol, lawmakers are considering two very different approaches. One bill, SB26-102, would establish common-sense guardrails to protect communities. Another, HB26-1030, would move in the opposite direction by offering a full tax break to incentivize more development. The outcome will shape how Colorado balances economic growth with community well-being.
That is why your voice matters right now.
Advocates from across the state are coming together for a Data Center Guardrails Lobby Day at the Colorado Capitol, and legislators need to hear directly from the people they represent, especially in key districts.
What: Data Center Guardrails Lobby Day
When: Thursday, April 23, 2026, from 8:30 a.m. to 1:30 p.m. Attend for as long as you can
Where: Colorado Capitol cafeteria
No lobbying experience is needed. Whether you can stay all morning or just stop by for an hour, there will be support every step of the way. Organizers will provide talking points, host prep sessions in advance and have staff on hand during the event to help guide you. You will not have to do it alone.
This is a chance to make sure lawmakers hear from their constituents about the need for thoughtful, responsible data center policy in Colorado.
If you are able to attend, now is the time to step in and speak up.
