Louise Lucas Presses Data Center Tax Repeal After Virginia Senate Vote

Sep 8, 2026, 6:00 AM ET

RICHMOND (VA) (AP). Nearly 20 years ago, Virginia offered tax breaks to tech companies on software and equipment. They began building. They built and the state became a Data Center hub. Residents complained about the noise as they continued to build. The artificial intelligence industry boomed and the power grid was strained, but still more building.

In response to a growing backlash against data centers across the country, Virginia senators voted on Monday to eliminate a tax break of $1.6 billion annually, and to require that industry pay a minimum sales tax of 5.3%. Some opponents have warned that the proposal could bring Virginia’s data center construction to a screeching stop.

Mark Obenshain, a Republican state senator, said that last month: “We are now out of the NIMBY phase. Not in my backyard.” “And we have entered the banana phase: Build absolutely nothing anywhere near anything.”

Virginia has become the largest data center in the world over the last 18 years. There is a debate in Virginia as many communities across the country are fighting against data centers at local zoning meeting, politicians are becoming concerned about AI and its effect on electricity bills for households, and lawmakers are looking to reduce or eliminate tax breaks.

The state tax department states that the industry has created thousands of jobs in Virginia over the last two years. Obenshain’s concerns are not the only ones. Data Center Coalition which represents the tech giants said that the tax would “effectively stop investment” in the industry. Amazon Data Services purchased land in northern Virginia from George Washington University for a datacenter just this month, according to officials.

A big debate over a big tax break

The proposal of the state Senate is not guaranteed to pass the House. It’s already creating a fight among Democrats due to a looming deadline.

Gov. Abigail Spanberger said that she was cautious about “going back” on Virginia’s promises to businesses who have invested in Virginia.

Democratic Sen. L. Louise Lucas (D-MN), who chairs the Finance Committee and supports the proposed tax, responded on X, “Gov. Spanberger says our chicken’s not cooked. What is the Senate to do? What about raises for teachers, health care assistance, transit support or a tax refund?

Lucas’ proposal reflects pushback across the country as data center aisles have grown to be larger and seem endless. Campuses of server warehouses and electrical substations with backup diesel generators are now bigger than factories and stadiums. Some require more power that a small town, and more than any utility could ever supply to a single customer.

Data centers are eligible for a number of benefits

The tax breaks are a common perk that developers of data centres, big and small, receive. State and local officials saw them as an economic boon, and competed with each other in order to get them.

These tax breaks allow developers to spend money tax free to equip expensive things like servers and routers, HVAC equipment, and in some cases to purchase the materials needed to build these items.

House Democrats in Virginia are fighting with Senators to maintain the current tax breaks. The budget negotiations will end on Saturday, and lawmakers must agree to a plan of spending by then.

The Senate voted 21 Democrats to 7 Republicans in favor of ending the tax incentives.

The Republican Senator Richard Stuart said that he did not think the repeal of tax breaks would slow down tech companies’ rush to build in Virginia. “This ain’t going to stop this train one iota.”

States reconsider tax breaks for data centres

Some states have curtailed or added conditions to tax incentives.

Minnesota lawmakers removed the exemption from sales tax on electricity purchased by the largest data centres last year. They also imposed a charge for electricity usage and tightened regulations.

Washington lawmakers are proposing legislation that will keep the tax breaks for new data centres, but eliminate them for existing data center that upgrade or replace equipment. This is $83 million in tax savings for Washington State.

In Illinois, Gov. JB Pritzker called last month for a “pause” of two years on tax breaks for data centers, citing the rising household electricity bills . Arizona Gov. Katie Hobbs wants to completely eliminate the sales tax exemption in Arizona. She called it “corporate handout.”

This year, Arizona, Michigan, and Georgia have introduced bills to repeal tax breaks, despite the fact that tech companies are adept at lobbying statehouses.

Georgia lawmakers passed a law imposing a 2-year suspension on the state sales tax exemptions for building and outfitting data centers. However, Georgia Gov. Brian Kemp vetoed the bill in 2024 .

Virginia senators continue to face opposition. The International Brotherhood of Electrical Workers (IBEW) lobbied lawmakers at the statehouse to protect data centres.

Dorian Hargrave said, “We need this sector,” in a Virginian electrical worker’s statement. If we lose this industry, our economy will take a big hit.

Email the Richmond City Council:
Andrew Breton, andrew.breton@rva.gov,
Katherine Jordan, katherine.jordan@rva.gov,
Kenya Gibson, kenya.gibson@rva.gov,
Sarah Abubaker, sarah.abubaker@rva.gov,
Stephanie Lynch, stephanie.lynch@rva.gov,
Ellen Robertson, ellen.robertson@rva.gov,
Cynthia Newbille, cynthia.newbille@rva.gov,
Reva Trammell, reva.trammell@rva.gov,
Nicole Jones, nicole.jones@rva.gov,

Email the Richmond School Board:
Matthew Percival, mpercival@rvaschools.net,
Kathryn Ricard, kricard@rvaschools.net,
Ali Faruk, afaruk@rvaschools.net,
Wesley Hedgepeth, whedgepeth@rvaschools.net,
Stephanie Rizzi, srizzi@rvaschools.net,
Anne Holton, aholton@rvaschools.net,
Cheryl Burke, cburke2@rvaschools.net,
Emmett Jafari, ejafari@rvaschools.net,
Shavonda Fernandez, sdixon@rvaschools.net,

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