The Texas Senate Finance Committee is scheduled to hold public hearings next week to scrutinize the state’s massive sales tax exemptions for data centers, following calls from Gov. Greg Abbott to eliminate the incentives.
The legislative review comes amid growing concerns over the booming industry’s impact on the state’s power grid and a ballooning price tag for taxpayers.
The tax incentives date back to 2013, when then-Gov. Rick Perry signed House Bill 1223 into law. The legislation was designed to lure out-of-state technology companies by offering 10- and 15-year state sales tax exemptions for data centers that hit investment thresholds of $200 million and $250 million, respectively.
While the program cost the state just $14 million during the 2014–15 budget cycle, the price tag has since skyrocketed. The Texas Comptroller’s office projects the tax breaks will cost the state $3.3 billion for the 2028–29 biennium, making it one of the state's most expensive economic incentive programs.
Abbott has recently taken a hardline stance against the facilities, calling for a repeal of the "outdated" incentives and demanding that new data center projects do more to protect local resources and add power capacity to the grid rather than just drawing from it.
The Senate Finance Committee will take up the issue to study the fiscal effects and determine whether the state should scale back or entirely eliminate the exemptions ahead of the next legislative session.
