End massive tax breaks for data centers in Ohio
The explosive growth of data centers in Ohio in recent years has been matched only by an equally explosive growth in heated opposition to the high-tech facilities for housing, storing, processing and distributing massive amounts of critical data and digital applications.
A plethora of communities in the Mahoning Valley and throughout the state understandably have enacted moratoriums on their construction. A statewide referendum campaign has gained steam toward banning construction of most new, large-scale hyperscale data centers altogether. Environmental and consumer advocates decry what they perceive as the heavy toll such centers take on finite water and energy supplies.
To be sure, data centers have risen as the No. 1 hot-potato public policy debate of our time.
In response, Ohio legislators have formed a fact-finding bipartisan study commission called the Ohio Joint Select Committee on Data Centers to thoroughly review the economic, environmental and security impacts of the 200-plus centers that have dotted the state in recent years. It met for the first time earlier this week and is charged with completing its mission with legislative solutions in the works within six months.
Given the relative novelty of data centers, the rapid-fire speed by which they have blanketed the Buckeye State and the many puzzling and unanswered questions surrounding them, we will patiently await the findings of the panel later this year on those and other large and contentious issues surrounding data centers.
But one pesky aspect of the development of data centers should not and cannot wait till year’s end for attention and action. That is the extravagant tax break that state government has been lavishly dishing out to them in recent years.
Investigative reporting from Signal Ohio and The Associated Press last week revealed that the statewide sales tax exemption for them cost Ohio taxpayers $1.6 billion in 2025. That’s a whopping 11 times more expensive than original forecasts from the Ohio Department of Taxation. On top of that, Ohioans lost an additional estimated $166 million in potential local sales tax revenue last year as well.
Though Gov. Mike DeWine issued a temporary pause in the tax exemptions earlier this week, that break should be eliminated permanently.
State Sen. Kent Smith, D-Euclid, minces no words in his bull’s-eye depiction of such mammoth revenue losses: “Now that we know how much it is costing the state of Ohio, it is undeniable that this is the worst tax break in Ohio’s history. It needs to be repealed before the Legislature goes on summer break.”
Toward that needed end, he and state Sen. Louis Blessing, R-Colerain Township, are lead sponsors of Senate Bill 374, which is co-sponsored by Senate Minority Leader Nickie J. Antonio. That recently introduced legislation that calls for the immediate termination of the sales-tax holiday granted data centers.
With less than one month before the Ohio General Assembly’s summer recess begins, clearly SB 374 merits a ride on the fast track to bipartisan and overwhelming passage. Given the fierce and diverse spectrum of opposition to the state handouts, speedy enactment should not be a major hurdle.
For one, the Ohio Farm Bureau argues that multibillion-dollar companies such as Meta, Google and Amazon receive unfair advantages compared with other industries not afforded the substantial tax breaks.
Ohio Policy Matters, a statewide research institute, also has heavily opposed the state’s generous tax breaks and resource subsidies for massive data centers. The organization argues that recipients of the exemptions use up valuable resources while generating negligible permanent employment.
Studies have shown that while data centers account for over 90% of certain large-scale investments announced by the governor, they represent less than 5% of new job creation in the state. That’s because even though construction of the centers does spur hundreds of jobs to build the facilities, relatively few permanent full-time jobs result.
For example, ArkData Centers, an Iowa-based company backed by The Carlyle Group, earlier this year received a $4.5 million, 10-year sales tax exemption for expansion of its facilities in Akron and Independence. The return on that colossal tax break will reportedly yield a measly 10 permanent jobs.
We and others believe those billions of dollars lost through taxation relaxation could be much better used to support such critical underfunded state responsibilities as public education, health care and infrastructure in the Buckeye State.
That’s why this unnecessary and widening leak on Ohio’s revenue base must be plugged as soon as possible. Though more general environmental and energy concerns of the growth of data centers must wait for completion of the state commission’s intensive fact-finding mission to be adequately addressed, there is no time to waste to rescind the frivolous and unnecessary sales-tax exemptions.
Failure to do so this spring would only further inflame this hot-potato issue and represent an egregious dereliction of duty by state legislators.
