Uncertain benefits of substantial tax breaks for vast data centers in Wisconsin
In a move that has set the stage for a significant shift in Wisconsin's technological landscape, Microsoft has announced plans for a $4 billion data center in Kenosha County, joining five other large-scale data center projects already in progress across the state. These projects, including the first Microsoft data center in Mount Pleasant and the Vantage data center in Port Washington, require a combined 3.9 gigawatts of power - enough to power 4.3 million Wisconsin homes.
The energy consumption of these data centers, if all are built, could be much higher than currently known, according to Clean Wisconsin Science Program Director Paul Mathewson. This raises concerns about energy availability and consumer electricity prices.
Good Jobs First, a non-profit watchdog organisation, has been examining deals surrounding data centers and provides insights into tax breaks and subsidies. Kasia Tarczynska, Senior Research Analyst at Good Jobs First, compares the benefits for data center companies in Tax Increment Financing (TID) districts to getting a "free mortgage or free house construction". In a TID, the additional property taxes that would have been collected by local government from the project are instead kept in the district for the company's use.
The state has already conceded property taxes, sales tax, and employment benefits for the data center projects, as stated in its last budget. Having a data center in a TID means that the company isn't paying new property tax into the local community to fund things like roads, police, fire, and schools.
Wisconsin Gov. Tony Evers and Milwaukee County Executive David Crowley have commented on the benefits of the project, while the Wisconsin Taxpayers Alliance has taken on the investigation of subsidies and tax benefits for data centers in Wisconsin, providing information to the public.
However, it is worth noting that data centers do not create a large number of jobs and the jobs they do create often go to residents outside of the community. This has led to a debate about the local benefits of these projects.
In a positive note, Minnesota reinstated its sales tax on electricity at data centers in June, while sales tax on equipment was extended for up to 35 years. This move could potentially help balance the energy consumption and financial implications of data centers.
The data centers in Port Washington and Beaver Dam have exceptions to the state's 12% rule related to TID, and the state exempts sales tax on electricity, construction materials, water cooling systems, and computing equipment at qualified data centers. Wisconsin state lawmakers have approved exceptions for these two large data centers in Port Washington and Beaver Dam to the state's 12% rule related to TID.
As the data center projects progress, the debate surrounding energy use, tax breaks, and local benefits continues. The Jack Kemp Foundation predicts that data centers could lead to the average American's energy bill increasing from 25% to 70% in the next 10 years without intervention from policymakers. It is essential for policymakers to consider these factors as they navigate the future of data centers in Wisconsin.
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