Connect with us

State News

Workers, Speaker Scott Criticize Plan to Axe Data Center Tax Exemption as Budgets Advance

Published

on

In a General Assembly room cramped with electrical workers from across the commonwealth, a group of bipartisan lawmakers on Thursday marched in one by one to tell them that they support the data center industry and the construction jobs that come along with them.

It was hours before the House passed its proposed budget and the Senate advanced its spending plan, which would repeal the sales and use tax exemption for data centers starting in the next calendar year.

‘I love the jobs that they create, and I love Virginia’s economy to do well,” Speaker Don Scott, D-Portsmouth, said. “So it’s not just that I love data centers, I love the fact the jobs they produce. We have to be realistic about what we’re producing … good union jobs.”

IBEW members speak to Speaker Don Scott to retain sales and use tax exemption for data centers. (Photo by Shannon Heckt/Virginia Mercury)

The electrical workers, part of varying chapters of the International Brotherhood of Electrical Workers, traveled to Richmond to plead with legislators to not go forward with the Senate’s budget plan.

The union members said the data center boom has allowed many of them to significantly increase their wages. They are concerned that removing the incentive will cause the companies to leave Virginia for the dozens of other states that have similar incentives in place, they told legislators.

“This is a coveted industry around the country, and it’s very important to us here in Virginia, so we ain’t got to pack our bags and go travel to do this work we’re doing right now,” said Jason Parker, Vice President of IBEW LU 1340.

Lawmakers said this week the state misses out on an estimated $1-2 billion dollars annually by allowing the data center industry to bypass the 5.3% state sales tax on the equipment and software used inside the warehouse-style facilities.

Sen. L. Louise Lucas, D-Portsmouth, has led the move to repeal the exemption, saying it would ensure the data center industry is “paying their fair share” of costs to operate in the state.

“I want (the money) to go towards hard-working families. We’ve got people who are struggling to put food on the table, to put a roof over their heads, pay for their car payment, and their kids’ school. I want that money to go back to them,” Lucas said.

Conversely, the Data Center Coalition highlighted over $100 billion that the industry has invested in the state over the last three years and the jobs it has created.

The 2024 Joint Legislative Audit and Review Commission report on data centers found that the majority of jobs the industry created are construction roles, and there are far fewer permanent jobs at the centers once they are built.

Data centers reported to state authorities that they’d created 1,197 net new jobs during fiscal year 2024, an investment equaling about $32 billion. Roughly $21.7 billion of that covered equipment or software that was exempt from state sales tax.

In fiscal year 2025, they reported 1,610 net new jobs and an investment of approximately $48.6 billion, $33.2 billion of which they said was exempt from sales tax. The state exempted over $3.2 billion in fiscal years ‘24 and ‘25 of the total $80 billion in industry investments over those two years.

Senate Democrats have framed the proposed end of data centers’ tax exemption as a way to ease financial strain on cash-strapped Virginians and an extension of their affordability agenda.

But Sen. Ryan McDougal, R-Hanover, diverged, telling the union members that the General Assembly should honor the commitment the state made to the industry.

“We made a deal. We can say in the future, we’re not gonna make the same deal, we want a different deal in the future,” McDougal said. “But you don’t change the deal on people while you’re in the process.”

Members of the House from both sides of the aisle, including Scott, are concerned that getting rid of the exemption would curb data center development here. The chamber’s spending plan keeps the exemption through 2035 but adds environmental and energy investment requirements that data centers would have to meet to keep the carveout.

“We can’t continue business as usual. It has some other concerns we’re dealing with,” Scott said before the union members. “There are a lot of different things that I wanted to do in exchange for getting the extension. That’s where I am. So I would love this industry to continue to grow. I don’t want to kill the golden goose.”

Mixed reactions during floor debate

On the Senate floor Thursday afternoon, the budget received bipartisan support, but also a fair amount of criticism. Sen. Mark Obenshain, R-Harrisonburg, called the repeal of the sales and use tax exemption “economic destruction.”

“To say that across Virginia, counties that are struggling to be able to afford basic infrastructure, to be able to afford basic services … that you can’t enjoy some of the benefits that some of the counties have enjoyed, is simply wrong,” Obenshain said.

Several Democrats and Republicans stood to speak in favor of the repeal, citing growing concerns from their constituents about data centers’ water use, land supply, and increased energy demands that are projected to add costs to utility bills.

Sen. Danica Roem, D-Manassas, identified data centers as a top priority for her constituents who live in Northern Virginia, where most of the facilities are concentrated.

“We’ve got to do something about this,” Roem said. “This is the do-something moment.”

The budget negotiations will continue for the next few weeks. Now that each version has passed their respective chambers, they will have to be consolidated and hashed out in closed door conference committee meetings.

Gov. Abigail Spanberger will then have the chance to make changes to the budget after the legislature presents it to her before signing it into law next month.

 

by Shannon Heckt, Virginia Mercury


Virginia Mercury is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Virginia Mercury maintains editorial independence. Contact Editor Samantha Willis for questions: info@virginiamercury.com.

Front Royal, VA
88°
Partly Cloudy
6:30 am8:02 pm EDT
Feels like: 91°F
Wind: 2mph WNW
Humidity: 51%
Pressure: 29.9"Hg
UV index: 1
ThuFriSat
84°F / 64°F
79°F / 66°F
81°F / 64°F
Historically Speaking2 hours ago

Number of Retiring U.S. Senators Ranks Among Top 5

Local Government2 hours ago

DATA Centers Future Here, Changes in Zoning Text Amendment Procedures, and a Little Post-Meeting Drama for One Supervisor

Local News3 hours ago

Missed the VA250 Mobile Museum? Another Stop Is Coming Close By

State News3 hours ago

Balancing Optimism and Caution, Spanberger Says Virginia’s Revenues Grew $2.1 Billion in Fiscal Year 2026

Obituaries3 hours ago

Lorraine Partlowe Dovel (1942 – 2026)

State News10 hours ago

SCC Commissioner, Former NextEra Attorney Declines to Recuse Herself From Merger Case

National News10 hours ago

Historic Preservation Group Asks Supreme Court to Halt Trump’s $400 Million White House Ballroom

Interesting Things to Know12 hours ago

How to Control Your Lights With Your Voice

Community Events1 day ago

This Week’s Showtimes at Royal Cinemas as of August 20th

State News1 day ago

Spanberger Signs Executive Order to Boost Virginia’s Emergency Preparedness

Local News1 day ago

Middletown Secures Third Straight Virginia Trees for Clean Water Grant

Local News1 day ago

Warren Coalition Plans Recovery Month Kickball Game, Picnic to Support Local Recovery

Local News1 day ago

Blue Ridge Wildlife Center Patient of the Week: Common Raven

National News1 day ago

DOJ Probes William & Mary Over Alleged Race-Based Scholarship Policies

Local News1 day ago

Royal Oak Computers Moving After 35 Years in Downtown Front Royal

Mature Living1 day ago

Why You May Feel Younger Than Your Actual Age

Local News1 day ago

Virginia Launches 25th Anniversary ‘Drive Sober or Get Pulled Over’ Campaign

Community Events1 day ago

Selah Theatre Project to Open New Winchester Arts Center With ‘Come From Away’

National News1 day ago

Alongside Kiggans, US House Speaker Says Virginia’s 2nd District ‘Will Determine the Fate of the Country’

State News1 day ago

Virginia Secures $17 Million to Upgrade Rail Service and Improve Transportation Infrastructure

State News1 day ago

Mice May Drive Lyme Disease More Than Deer

Punditry & Prose1 day ago

College Football 2026: You Can Taste the Excitement!

Real Estate1 day ago

Fall Is the Buyer’s Season — Start Now, Be Home by Christmas

Interesting Things to Know2 days ago

AI Investment Boom Reaches Historic Scale, but Returns Remain Uncertain

Agriculture2 days ago

Antique Tractor Preservation Day Celebrates the Machines and Families That Built Modern Agriculture