Ohio, one of the nation’s data center destination hot spots, is suspending a tax break that has been critical to its competition with other states to attract the massive new facilities that power and train artificial intelligence chatbots.
The move Wednesday by Republican Gov. Mike DeWine comes as tax breaks for energy-hungry AI data centers are increasingly playing a role in state budgets and the industry is under pressure to pay the full costs of the vast network of its computing warehouses needed to power AI.
The size of Ohio’s tax break skyrocketed, dwarfing previous projections, as opposition to data centers is sweeping through cities, suburbs and towns there and prompting lawmakers to form a committee to study the impact.
In the meantime, residents are trying to bypass the GOP-controlled Legislature and get a referendum on November’s midterm election ballot that’s designed to permanently ban hyperscale data centers, likely the strictest such statewide ban under consideration in the U.S.
DeWine’s office cited the rising utilization of the tax break and the state Legislature’s new research undertaking to declare a “pause” in granting it to new applicants.
“The governor felt it was the right time to let the citizens know, let businesses know that we’re going to pause on new offers of this tax incentive while that process plays out,” DeWine’s spokesperson, Dan Tierney, said Thursday.
I understand this desire, but its a potentially simplistic view. There are times that for every $1 worth tax break to one entity generates a scaled $10 of tax revenue for the city or state. Why would it make sense to lose the overall net tax revenue to the people?
Sometimes it means that city or state has jobs that can employ their residents instead of the city or state continuing to decline when people move away for needed jobs. There are simply lots of places that companies don’t want to go and that its sometimes worth it to offer the tax break to incentivize them to come.
Other times it can be for a company to come in and offer a needed service to the community that would otherwise be unprofitable, and the residents would simply need to go without.
Unless your city or state is an extremely desirable place to be, its frequently difficult to get new employers to come or expand in less desirable places.