Massive tax cuts, meager job creation, large power requirements, and delayed action on climate change among the issues
As Ohio entices yet more data centers, a watchdog group is raising important questions about whether that’s good for average Ohioans.
[RELATED: Tax abatement approved for proposed $750 million data center north of BG]
Among them are whether the state is giving up too much in tax revenue for the number of jobs they’ll create, who will pay to add electricity generation to meet the centers’ surging demand, and whether the new demand will force fossil-fuel burning generators to stay online, making the world’s climate crisis worse.
The progressive watchdog group Policy Matters Ohio last Tuesday released an analysis saying that sales-tax exemptions created in 2013 could cost the state dearly to subsidize some of the largest corporations on the planet. Their need for server capacity had already been rapidly increasing, but with the advent of AI it’s expected to skyrocket sharply.
“If the investments announced by Amazon, Google, and Microsoft in the past two years are all covered by the tax break, the state and localities could lose out on almost $1.6 billion in sales-tax revenue, with only modest job-creation to show for it,” a statement accompanying the analysis said.
The state doesn’t have tax revenue to spare. House Speaker Matt Huffman, R-Lima, last week claimed Ohio’s school funding formula was “unsustainable.”
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Even so, the Policy Matters report said, the state is giving up money from the tech giants to directly create a paltry number of jobs. The investments the companies are making might sound huge, but exemptions already granted to Google and Facebook owner Meta cost Ohio an estimated $1 million per job created, the analysis said.
In addition, with the big tech companies desperate for more data centers, it’s questionable whether Ohio taxpayers need to pay billions to lure them.
The Policy Matters report cites a New York Times story that quotes Microsoft executive Bo Washington saying, “I can’t think of a site selection or placement decision that was decided on a set of tax incentives.”
Those comments fit with research indicating that in 75% of cases, tax incentives don’t make the differenceas businesses decide where to locate.
A spokesman for Gov. Mike DeWine was asked whether the governor is satisfied that the tax breaks Ohio is giving the big tech companies are necessary, and whether they’re a good deal for the number of jobs they promise to bring. He responded by citing a Dec. 16 press release celebrating an Amazon Web Services announcement that it would spend $10 billion building data centers in Ohio.
“AWS’s investments support thousands of new jobs in high-demand sectors like telecommunications, software development, facilities maintenance, and electricity generation within the cloud infrastructure supply chain,” it said, but it didn’t provide any documentation to support the claim.
The Policy Matters report also questioned who would shoulder most of the burden of adding electricity generation to meet the voracious demands of the data centers — the tech giants that own them, or Ohio’s long-suffering ratepayers. Cleveland.com last week reported that regulators are in the process of trying to decide that complex issue, while DeWine’s office didn’t respond when asked what he thought would be fair.
It’s an important issue, the Policy Matters report said.
“All of this underlines this question: Why do we want to provide massive subsidies to some of the wealthiest corporations when the result could be higher costs for Ohioans and Ohio businesses?” it asked. “The gigantic growth of electricity demand from data centers also could threaten progress in cutting greenhouse gas emissions.”
