States withdraw data center incentives as lawmakers raise concerns over energy costs

For the better part of a decade, states competed aggressively to lure data centers with generous tax breaks. Now, that era appears to be ending. A growing number of US states are pulling back incentives as lawmakers confront an uncomfortable question: why are taxpayers subsidizing some of the most profitable companies on the planet? Arizona, Pennsylvania, Illinois, and Texas have all moved in recent weeks to pause, repeal, or fundamentally rethink their data center tax exemptions. The common thread connecting these decisions is electricity, specifically how much of it data centers consume and who ends up paying for the infrastructure to deliver it. The dominos are falling fast Arizona enacted a three-year moratorium on new data center sales tax exemption applications, set to run from July 1, 2026, through June 30, 2029. The measure was tucked into the state’s 2026 budget, a signal that this wasn’t a fringe concern but a mainstream fiscal priority. Pennsylvania’s House went further. On June 25, 2026, lawmakers voted 197-5 to repeal sales tax incentives under the state’s Computer Data Center Equipment Incentive Program. Illinois Governor J.B. Pritzker directed a pause on data center ...