Virginia senators push to kill data center tax break, saying state is 'giving away billions'

Virginia's fight over whether to keep subsidizing data centers is picking up speed with the state budget due at the end of June.

In Hampton, Sens. Mamie Locke and Louise Lucas said the Commonwealth should stop shielding a dominant industry from taxes.

What happened?

With the June 30 budget deadline nearing, Locke and Lucas used a Hampton rally to press lawmakers to repeal Virginia's sales and use tax exemption for data centers, according to WTKR. They argue the incentive has become much more expensive than anyone expected when it was extended in 2016.

At Hampton City Hall, Lucas tied the issue directly to state spending priorities, saying, "They need to pay their fair share so we can continue to pay for education, public safety, Medicaid, all of our core projects." 

"We're giving away billions of dollars to these data centers," she added. "We need to stop it right now."

Virginia is believed to host roughly 35% of the world's data centers, WTKR reported, yet the House of Delegates' budget plan stops short of ending the exemption. An alternative is to establish a commission to study the industry's impact and make recommendations later.

Why does it matter?

The exemption was sold as an investment incentive and later extended through 2035, but it now carries an estimated annual price tag of $2 billion.

Lucas said her criticism concerns the public cost, not the technology's existence. "We are not opposed to technology. We know we all need technology. The problem is, how much will the voters of the Commonwealth — how much are they willing to pay for it?"

Removing or reducing the tax break could free up room in the state budget.

It also reflects a broader debate that extends beyond Virginia: once large-scale digital infrastructure is entrenched, states must decide how long to keep generous public incentives in place.

What are people saying?

Not everyone agrees Virginia should move quickly.

House Speaker Don Scott signaled support for a slower, study-first approach, saying, "The question is not how did we get here, but how do we fix it and fix it in a non-disruptive way," according to WTKR. 

Opponents of an immediate change include the Data Center Coalition. Nicole Riley, the group's director of Virginia government relations, said ending the policy early would mean "going back on commitments that have been made to the industry and to those that have made investments here in Virginia." She added, "We're certainly willing to be at the table to talk about it and try to come to something that reasonably and feasibly can be done."

On the question of a possible shutdown, Locke rejected that scenario, saying, "We are not anywhere near talking about a government shutdown. We don't do that here in the commonwealth of Virginia."

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