A major data center hub has put the brakes on tax incentives that helped attract massive computing facilities used for artificial intelligence development.
Republican Gov. Mike DeWine announced Wednesday that Ohio will temporarily halt its tax break program for new data center applications. The decision follows mounting pressure on the AI industry to cover the full expenses of their energy-intensive operations and growing public opposition to these facilities.
The tax incentive program’s costs have exploded beyond all forecasts, prompting state lawmakers to launch a study committee examining the impact of data centers. Meanwhile, citizens are working to place a ballot measure on November’s midterm election that would implement what could be the nation’s most restrictive statewide prohibition on hyperscale data centers.
DeWine’s administration pointed to the dramatic increase in tax break usage and the legislature’s ongoing research as reasons for implementing the temporary suspension.
“The governor felt it was the right time to let the citizens know, let businesses know that we’re going to pause on new offers of this tax incentive while that process plays out,” said Dan Tierney, DeWine’s spokesperson, on Thursday.
Despite the pause, DeWine continues to advocate for data centers, describing them as essential to the modern economy. He has defended the approximately $37 billion in data center investments flowing into the state during 2024 and 2025 as beneficial.
The financial reality has far exceeded state projections. Officials had estimated the tax exemption would reach $136 million in fiscal 2025 and $142 million in fiscal 2026, based on historical patterns. Instead, the actual costs hit $554 million in 2024 and approached $1.6 billion in 2025.
The future of Ohio’s tax incentive program may depend on the next governor, as DeWine cannot seek reelection due to term limits. Republican candidate Vivek Ramaswamy, an Ivy League-educated biotech billionaire, has expressed interest in transforming the Ohio River Valley into a technology hub similar to Silicon Valley.
Both Ramaswamy and Democratic candidate Amy Acton may share the November ballot with the citizen-driven initiative to ban data center construction statewide. Organizers face a July 1 deadline to collect more than 400,000 voter signatures.
Criticism of state tax incentives for data centers is spreading among elected officials nationwide. The financial burden appears to be growing as data center and AI investments fuel increased consumer spending and technology companies expand their commitments to large-scale facilities.
Virginia has experienced similar challenges, with state House and Senate negotiations stalled for months over Senate Democrats’ proposal to eliminate roughly $1.6 billion in annual tax breaks.
According to the National Conference of State Legislatures, thirty-eight states currently offer some form of sales tax exemption for data centers. Most of these programs received approval over five years ago, when data centers represented a smaller economic sector and before OpenAI’s ChatGPT launch in late 2022 sparked an accelerated expansion of increasingly large facilities.
Ohio’s exemption covers a wide range of expenses, including construction materials and costly equipment like server racks and cooling systems used in data centers. Operators frequently purchase new server racks every few years as technology advances.
The governor’s announcement caught many by surprise. Dorsey Hager, executive secretary-treasurer of the Columbus/Central Ohio Building and Construction Trades Council, expressed frustration with DeWine’s decision. Union members in his organization frequently work on data center construction projects.
Hager expressed concern that developers currently finalizing project plans or permits might reconsider their commitments.
State legislators recognized the growing opposition when they announced their joint data center study committee on May 13.
“We’re well aware of initiatives to limit Ohio data center development during this critical point in America’s history,” state Rep. Adam Holmes stated at a news conference. “This public concern has become a priority issue for us and could have dramatic impact on Ohio and American’s future.”
