- Texas has been losing more and more every year to missing data center tax
- Previously just a few million, the state could lose $1.3 billion in 2026 alone
- Supporters say benefits include major investments and other tax revenue
The State of Texas could be set to lose $3.2 billion in sales tax revenue over the course of the next two years due to a long-standing tax exemption that's in place for data centers – one of the most expensive incentive programs in the state.
However this figure is a general estimation, and growing data center construction could actually mean that even more taxes are being lost.
Additionally, the figure has grown substantially in recent years, leading to around $1.3 billion in exemptions in 2026 compared with around $150 million annually in 2023 and 2024 and $5-30 million annually between 2014 and 2022.
Texas data center tax exemptions are becoming costlier than ever
Speaking about the lost revenue with the Texas Tribune, state Senator Joan Huffman explained: "These new numbers are extremely concerning and I will say they’re unsustainable."
Lawmakers are now questioning whether the tax exemptions remain sustainable and are exploring scaling them back or removing them entirely. "I plan to look at filing legislation to either repeal the exemption or take a very close look at it and see," Huffman added.
Billions in lost revenue is now preventing public funding for services like schools and disaster recovery.
However, Texas's position as one of the most generous states tax-wise has resulted in major projects being located in the state, including OpenAI's Abilene campus under the Stargate Project. Four of Stargate's data centers were projected to create 25,000 onsite jobs – two of those centers are located in Texas.
Supporters of the scheme argue that the tax incentives attract major investments such as the above, and generate other tax revenues.
Other states with tax incentives for data centers, including Virginia, Illinois, Michigan, Arizona and Georgia, are also reportedly exploring future options amid sustainability concerns.
