Texas faces a projected $3.2 billion loss in sales tax revenue over two years due to a rapidly expanding tax exemption program for the state's booming data center industry.

Key Points

• Texas is currently forgoing at least $1.3 billion in annual revenue from data center tax breaks, a figure projected to reach nearly $1.8 billion by 2030.
• The state currently hosts over 300 operating data centers, with at least 142 additional facilities under construction, leading the nation in new development.
• Qualifying facilities receive exemptions on state sales taxes for construction materials, hardware, software, and electricity consumption.
• State lawmakers, including Senate Finance Committee chair Joan Huffman, are considering repealing or limiting the incentives during the upcoming legislative session.
• The Data Center Coalition argues that these tax breaks are essential to maintaining Texas' status as a top destination for global tech investment.

Why it Matters

The rapid growth of the data center industry, fueled by the artificial intelligence boom, has turned a once-modest incentive into one of the state's most expensive tax programs. Lawmakers must now balance the desire to attract high-tech infrastructure against the significant fiscal impact and growing public concern over the industry's heavy consumption of land, water, and electricity.