President Donald Trump and Democratic governors don’t often agree on policy issues. But Trump and North Carolina Gov. Josh Stein appear to be on the same page when it comes to protecting consumers from price hikes due to data centers driving up energy costs.
Stein is asking the North Carolina Energy Policy Task Force to weigh whether the state should modify or repeal sales tax exemptions for data centers.
At the moment, the state provides sales tax exemptions on data center purchases of electricity and equipment. The exemptions were enacted initially in 2006 and expanded in 2015.
“We lived in an entirely different world at that time,” Stein told the task force at its Wednesday meeting. “No one could have anticipated the explosive growth of data centers and how much energy they consumed, and because data centers at that point were a brand new industry, they benefited from financial incentives to induce capital to invest.”
But those days are long gone, Stein said, and the market is already delivering incentives for data center construction.
He asked the group to consider how subsidizing data center electricity and energy consumption could lead to higher rates and taxes for residents.
“We must be clear-eyed about the cost of data centers to ratepayers in terms of higher power bills, and clear about their cost to taxpayers in terms of lost revenue,” Stein said.
The governor highlighted the Trump administration’s ratepayer protection pledge from last month, which Stein said falls in line with the task force’s recommendations from February.
“It includes making sure that the data centers are either building, bringing or buying new power supply, they’re paying for new power delivery infrastructure upgrades, and they’re paying for power through new separate rate structures that protect residential rate payers,” Stein said.
The North Carolina Dept. of Commerce estimates that data centers in the state currently receive about $50 million each year in state sales and use tax exemptions, according to a memo released Monday by the governor’s office.
Data center tax breaks are on the chopping block in some states
If all the data centers currently planned in North Carolina are built, that figure would balloon to about $450 million each year, in addition to about $1.5 billion to $2.3 billion in equipment exemptions during construction, Commerce estimates.
A full repeal of the exemptions could increase state revenue by up to $450 million each year in the future, as well as avoiding the substantial cost of the construction exemptions.
However, a full repeal could discourage investment in artificial intelligence and data centers, which have contributed heavily to total nationwide GDP growth.
Stein also suggested the possibility of modifying the tax exemptions. This could still lead to a relative increase in state revenue by reducing the number of data centers eligible for the exemption, the governor’s memo said.
“We should spend taxpayer dollars and forgo revenue only when there is a clear direct value to the people of this state,” Stein told the task force Wednesday.
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