Amazon, Meta, and Google are looting Ohio to build more data centers.
The AI boom was sold on a promise: give the tech giants their tax breaks, and the jobs will follow. The bill has come due. Legislators and governors in more than 10 states—including Ohio, Illinois, New Jersey, and Washington—have paused or canceled sales-tax exemptions for data centers. The states that rushed to be first in line to subsidize the boom are now first in line to back out.
Nowhere is the reversal more severe than in Ohio. More than a decade ago, lawmakers exempted technology companies from sales taxes on the servers and equipment inside data centers, betting that a break worth millions would attract investment. The exemption helped turn Ohio into one of the country’s leading data-center destinations. Then the artificial-intelligence boom supersized it.
Here is the number: the exemption grew to more than $1.5 billion last year, over ten times the original state estimate, according to The Wall Street Journal’s reporting of Signal Ohio’s investigation. Voter outrage after Signal Ohio reported the scale of the provision prompted Governor Mike DeWine to pause new applications in May. The official fiscal note published with the bill was wrong by an order of magnitude. The original estimate contemplated a few hundred million dollars in equipment. The capital-spending wave that followed reached hundreds of billions across the industry. The document was not retrofitted. The dollar bill was.
A fiscal note is an official projection, not a blank check. A current-law baseline—the legal benchmark that holds scheduled law constant—does the same work for federal tax legislation through the Joint Committee on Taxation, or JCT. It measures what current law produces. It does not certify that a later technology wave will arrive at the estimate. Ohio’s note held the industry to millions while the AI buildout was expanding beyond measure.
That expansion is why the exemption matters. Chips and servers account for a significant share of a project’s cost, and the equipment is replaced every few years. Avoiding a 6% or 7% sales tax on hundreds of millions—or billions—of dollars in hardware helps determine where a facility goes, according to industry executives. More than 35 states still offer similar breaks. Ohio’s effective tax rate after incentives was 1.2% at the end of 2025, the lowest among 15 states analyzed by EY’s Quantitative Economics and Statistics team. California’s was 16.9%. The tax code is now choosing where the machines go.
DeWine’s pause was the first official acknowledgment that the projection was wrong. Democratic Representative Tristan Rader, whose Cleveland-area constituents have pushed back against the facilities, is proposing to repeal the exemption and renegotiate the multi-decade deals that Amazon, Meta, and Google signed with the state. His proposal would also impose new data-center taxes and require developers to pay more toward power and electrical infrastructure. “They seem to have more money than God,” Rader said, “and they’re able to build without the need for these types of incentives.”
Federal tax policy is compounding the state giveaway. Last year’s tax law restored immediate deductions for equipment purchases that otherwise would have been depreciated. The upcoming Opportunity Zone enhancement will offer additional tax breaks for certain rural investments. Stacked federal and state breaks are how the public tax code subsidizes the private infrastructure of AI.
The states that created this auction are retreating from it. New Jersey approved a $500 million data-center tax credit in 2024 by a unanimous Senate vote. Last month, it canceled the remaining $250 million with a 35–4 vote in the opposite direction. Virginia, which has more data centers than any other state, has taxed the electricity the facilities consume while keeping its equipment exemption. More than 10 states have now paused or canceled sales-tax exemptions for the facilities, and New York has enacted a one-year statewide pause on new construction. Texas and dozens of other states have proposed similar measures. Industry executives and advisers told The Wall Street Journal that future data-center projects could be pushed to Indiana, West Virginia, and Wyoming, which retained favorable tax regimes. Billions in benefits and the location of the industry’s next expansion are at stake.
Amazon, Meta, and Google are now defending the breaks. The industry says the backlash rests on misinformation. NetChoice chief executive Steve DelBianco has warned state officials that removing the incentives will damage their economies. “Our industry has been knocked on our backfoot,” he said.
The industry has three answers to the arithmetic: the other taxes the companies pay fund local schools and police departments; the investment creates jobs; and ending the incentives will send the facilities to other states. Each is offered by the industry receiving the exemption. A talking point is not a fiscal note. The legislature that wrote Ohio’s original exemption is now part of the coalition reversing it. The economic-development frame did not survive the dollar bill.
President Trump made the same case, arguing that data centers make states and towns rich, lower taxes, create wealth, and raise home values. “If you want to go through poverty, crime, and squalor, I would say don’t approve data centers,” he said. That is the political claim. The public record is the ratio.
Amazon says it has invested nearly $40 billion in Ohio data centers since 2015 and paid roughly $11 million last year in state property taxes and fees. Ohio surrendered $1.5 billion in sales-tax revenue through the exemption. The company’s payment was less than 1% of the giveaway. That is the best receipt for the other-taxes argument. It does not make the ratio disappear.
Voters have reached the same conclusion. Polls show that Americans overwhelmingly don’t want data centers near them, and the issue is following politicians into November’s elections. In Independence, Missouri, city council member John Perkins was voted out of office after approving billions in tax incentives for a data center. The message could not be plainer: approve the deal, lose the seat. Local jurisdictions are refusing arrangements their state legislatures once authorized. Voters in Ohio and Missouri have done the math.
Turning point or passing squall? Tim Schram, who specializes in state and local taxes at BDO, said the reversal happened “in hyperspeed because of hyperscaling”—the breakneck expansion of AI computing capacity. The ChatGPT-fueled frenzy that began in late 2022 and the hundreds of billions of dollars that followed caught statehouses off guard. Ian Boccaccio of the tax firm Ryan, which advises data-center clients, predicted that the exemptions will return. “This is a passing fad,” he said, “and in two years we won’t have these issues with data centers.”
A passing fad has already cost a Missouri councilman his job, turned a unanimous New Jersey Senate vote into a 35–4 repudiation, and forced Ohio’s governor to reverse course on a program that grew beyond all projections. That is not a passing political inconvenience. It is the bill coming due.
The 1981 supply-side tax cuts were sold with arithmetic of this kind. David Stockman, who designed them, later wrote that he had “out-and-out cooked the books.” The 2001 tax cuts were sold with arithmetic of this kind. Bruce Bartlett, who helped articulate them, later called the claim that tax cuts pay for themselves “hogwash” and “a lie.” The data-center exemptions of the 2020s are being sold on the same arithmetic. The pattern is 45 years old.
State legislatures can attach automatic sunset triggers to data-center exemptions that terminate when realized costs exceed the fiscal-note projection by half. Congress can condition the next Opportunity Zone enhancement on retrospective reconciliation of the tax break against the actual capital investment at qualifying rural sites. Neither is a radical reform. Both are standard controls for tax expenditures—the tax code’s name for special revenue-losing breaks—whose original cost projection was wrong by an order of magnitude.
The fiscal note, the tenfold overrun, and the ratio between tax surrendered and tax received are public. This is a deliberate choice. The score is the score. The deals are next.