University of Wisconsin–Madison

Money Lost to the Cloud: How Data Centers Benefit from State and Local Government Subsidies

Type Policy Brief or Report
Year 2016
Level City or Town, State
State(s) All States
Policy Areas Data & Technology
Tech companies have been rapidly expanding their networks of facilities that store and retrieve digital information through the creation of new data centers. State and local governments routinely subsidize these projects, providing traditional subsidies, such as local property tax abatements and investment tax credits, and even establishing incentive programs specifically for data centers. However, subsidies come at the last stage of the data center site selection process and often don’t function as true economic development incentives; that is, they don’t cause something to happen that wouldn’t otherwise. Instead, public officials pay companies to do what they were already planning to do. To avoid such overspending, this report recommends that states and localities fully disclose deal-specific and aggregate program costs (starting when a deal is being negotiated) and cap all state and local subsidies combined at $50,000 per permanent job, and urges public officials to walk away from excessive data center subsidy demands.

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