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A vast majority of U.S. states that offer lucrative tax incentives to attract data centers do not disclose which companies receive the benefits, creating a significant transparency gap. According to a recent analysis by Good Jobs First, a watchdog group on subsidies, 27 of the 34 states with such programs fail to report company-specific data, leaving the public and many lawmakers in the dark about the allocation of potentially billions in tax revenue.
These incentive programs, which primarily offer exemptions on sales and use taxes for expensive servers and other equipment, were established to lure major tech companies. However, their automatic, open-ended structure means costs can spiral without annual legislative review. The rapid expansion of artificial intelligence and cloud computing has dramatically increased the construction of these facilities, with one report detailing how these escalating, uncontrolled costs are endangering state budgets. Good Jobs First estimates that at least 10 states are already forgoing over $100 million in revenue each year due to these subsidies.
Advocacy groups are increasingly scrutinizing these practices. The American Economic Liberties Project released a brief providing guidance for reining in secret deals with Big Tech, arguing they drain public resources with little accountability. Data centers create relatively few permanent jobs compared to the size of the tax breaks and place significant strain on local power grids and water resources.
Virginia, home to the world's largest concentration of data centers, is frequently cited as a key example. Despite a subsidy program that has cost the state over $2 billion since its inception, it remains difficult to determine the exact beneficiaries. Watchdogs have repeatedly highlighted how Virginia's data center deals lack transparency, preventing a full cost-benefit analysis. In response to these concerns, reform advocates are now calling for mandatory company-specific disclosure, caps on tax breaks, and enforceable community benefit agreements to ensure the public receives a fair return on its investment.
