Amazon, Meta, and Google took Ohio’s $1.5 billion data-center tax exemption as their due. To be fair, the state agreed to it.
The story, told briefly. A decade ago Ohio’s legislature exempted computer servers and other data-center equipment from the state’s sales tax, betting the change would be worth millions. The exemption worked — Ohio became one of the leading destinations for data centers in the country. Then the AI boom arrived and supersized it. Last year, the exemption cost the state more than $1.5 billion, ten times the original projection, as earlier MSI reporting on the figure documented. Governor Mike DeWine paused new applications in May after Signal Ohio reported the scale. State Representative Tristan Rader, a Democrat from Cleveland, is now proposing to repeal the exemption and renegotiate past deals with Amazon, Meta, and Alphabet’s Google — companies that locked in tax treatment for decades through contracts the state is now struggling to unwind. More than ten states have done similar walkbacks, including Illinois, New Jersey, and Washington. New Jersey signed off on a $500 million data-center tax credit in 2024 by unanimous Senate vote; last month the Senate voted 35–4 to cancel the remaining $250 million.
The data-center industry — call it what it is, a physical-extractive business built on the seven-layer cake of platform-power consolidation (cloud, CDN, DNS, submarine cable, chip, mobile duopoly, ad-tech stack) that this column has documented before — does not sell what its marketing claims it sells. The marketing language is “the cloud,” “AI infrastructure,” “the next wave of economic development.” What the industry actually does is consume enormous quantities of electricity and water, anchor itself to specific substations and watersheds, and ship the resulting compute back to a handful of coastal firms for resale. The economics of a data center are not the economics of a factory. A factory makes a thing; the thing leaves through a loading dock; the factory pays wages, property tax, and corporate income tax on what it sold. A data center consumes a megawatt, returns nothing tangible to the surrounding economy except a few dozen permanent jobs and a couple of million dollars in property tax per facility, and books its revenue at a headquarters a thousand miles away. More than 35 states have signed onto the same logic by offering sales-tax exemptions or similar benefits.
The cui bono trace. The taxpayer of Ohio, who now has a $1.5 billion hole in the state’s sales-tax base. The ratepayer, whose utility is being asked to build new generation and transmission for a single industrial customer that has been exempted from contributing to the public fisc. The local community that lives next to the substation. The state legislature that wrote the original exemption believing, in good faith, that they were bargaining over millions. Harold Innis, the Canadian political economist whose staples thesis described how metropolitan economies organize themselves to extract staple commodities — fur, timber, wheat, oil — from the hinterland while leaving the costs and the consequences in the producing region, would have recognized the structure immediately. The data center is the new staple. The state is the new hinterland.
It is worth being precise about what a hyperscale data center actually is, because the public discourse has the misleading habit of treating it as a building rather than as a continuously-tuned extractive operation. A facility the size Amazon operates in central Ohio draws on the order of a hundred megawatts of continuous power — comparable, in industrial terms, to a small aluminum smelter or a chunk of a mid-sized city’s grid. It is cooled by water, often drawn from municipal systems that were sized for residential demand. It is connected to high-voltage transmission that was built, in part, with public capital and rate-base recovery. The compute produced inside that facility is sold, through AWS, to firms building AI products whose economic value accrues to a small number of coastal beneficiaries. The data center itself, in other words, is a node in a value-extraction network whose economics work precisely because the local jurisdiction is paying part of the bill. The arithmetic, when Amazon bothers to publish it, confirms the structure: the company reports nearly $40 billion in Ohio data-center investment since 2015 and $11 million in state property tax last year. That is a return on the public subsidy that would make a private-equity extraction artist blush.
The industry’s defense of the deal deserves a closer look. Steve DelBianco of NetChoice, the trade association that fights regulation of the technology industry, called the backlash “misinformation” and warned state officials that eliminating incentives would hurt their economies. To be fair to him, in the narrow sense in which a trade-association spokesperson is usually being fair, the elimination of an exemption that locks in a particular firm for thirty years does carry costs — the firm has built its site plan around the deal, and walking it back means renegotiating with a counterparty that has more lawyers than the state. That concession makes the case for never signing these deals in the first place, not for keeping them now that the state knows what they cost. The trouble is that the exemption DelBianco is defending is itself a form of misinformation — the legislators who voted for it were told it would cost millions; the legislators voting to repeal it now have a documented record showing it cost $1.5 billion in a single year. When the deal’s own arithmetic is the misinformation, defending the deal is defending the misinformation. Ian Boccaccio of the tax firm Ryan, who advises data-center clients, took the dismissive-forecasting approach: the backlash, he said, “is a passing fad,” and “in two years we won’t have these issues with data centers.” That is the same posture the cable industry took when municipalities tried to build public broadband in the 2000s, and the same one the private-equity rollup artists took when nursing-home workers tried to organize. The structural complaint is always that the resistance will pass; the structural complaint is always wrong.
President Trump’s contribution to the debate, in case anyone was waiting for it, was to tell voters that if they reject data centers they are choosing “poverty, crime, and squalor.” This is the threat-inflation closer: name a vivid dystopia, attach it to the choice the listeners are about to make, and rely on the audience’s inability to evaluate the comparative economics of a $40 billion capital investment that pays $11 million a year in property tax against a sales-tax exemption that costs $1.5 billion. The arithmetic speaks for itself — Ohio’s effective tax rate on data centers landed at 1.2% at the end of 2025, the lowest of fifteen states in EY’s quantitative analysis; California’s, at the other end of the scale, was 16.9% — and the rhetoric is intended to drown it out.
The pattern is not unique to Ohio, and it is not unique to the United States. Canadian provinces have built their own data-center tax-incentive regimes and have, on a case-by-case basis, granted hyperscale operators the kind of preferential electricity-rate treatment Ohio signed away in sales-tax form. Whether the federal regulator steps in to set public-interest conditions on data-center power purchases, or whether the provinces keep handling it themselves, the shape of the argument is the same: a public subsidy whose arithmetic the public was never asked to check. Michael Geist at the University of Ottawa, who has tracked the broader pattern of platform-tax competition among Canadian jurisdictions, has catalogued enough of these structures to make the Innis frame look less like academic analogy and more like a description of the present. The four constraints that historically limited platform power — competition, regulation, self-help, and labor, in the formulation Cory Doctorow has made familiar — are all weakened when the public sector joins the race to the bottom on behalf of the platforms.
The repeal-and-renegotiation push in Ohio, New Jersey, and the other states is not a complete answer to the underlying problem. Renegotiating with Amazon, Meta, and Google means sitting across a table from the most expensive legal apparatus in the private economy and asking them to accept a worse deal than the one they already have. The lever the states actually have is the social-license one — voters, in the swing-state polling this column has cited before, are increasingly unwilling to subsidize facilities whose principal economic benefit accrues to firms headquartered elsewhere. The operators are already redesigning sites as the moratoriums spread, which suggests they understand what the data has been telling them. The states that still want to lure the industry can do so; the states that want to tax it fairly can do so; the states that want to repeal and renegotiate can do so. The one thing they cannot do is pretend the original deal was the deal they thought they were getting.
There is a procedural detail that matters, because deadlines are the only part of regulatory processes the regulated actually respect. The Ohio pause, the New Jersey cancellation, the Illinois walkback — each has its own calendar, and the records are open. The math, $40 billion down and $11 million a year back, is what it is.