Virginia’s datacenter tax breaks cost state $1.6B in 2025
Summary
Virginia forfeited $1.6 billion in tax revenue through datacenter sales and use tax exemptions in fiscal 2025 — a 118% rise from the prior year — as AI-driven hyperscale construction accelerated. The state’s qualification threshold is comparatively low (just $150 million in capital investment and 50 new jobs), and exemptions cover purchases of computer equipment, software and hardware. Good Jobs First warns these incentives have become effectively automatic and recommends ending the breaks; local property tax reductions can further reduce municipal receipts. Public opposition is growing over water, electricity use and landscape impact, while federal-level scrutiny and calls for moratoria have surfaced.
Key Points
- Virginia lost $1.6 billion in 2025 to datacenter tax exemptions, up 118% year-on-year.
- To qualify a project needs just $150 million in capital investment and 50 new jobs — modest compared with hyperscale builds.
- Exemptions apply to retail sales and use taxes on computer equipment, software and hardware; recipients may also secure local property tax reductions.
- Virginia has one of the highest datacentre concentrations globally (more than 600 facilities reported).
- Good Jobs First says state-level studies show a sharply negative return on these subsidies and urges elimination of exemptions.
- Grassroots campaigns in several states are pushing back over water consumption, electricity demand and visual impacts.
- Policymakers and senators have expressed concern about rising grid costs being passed to consumers; some have proposed moratoria.
Why should I read this?
Quick and blunt: Virginia handed out a billion-plus in freebies so big cloud firms can expand. If you care who ends up footing the bill for roads, power upgrades and local services — and whether mega-tech gets preferential treatment — this is worth a read. We’ve skimmed the numbers and the politics so you don’t have to.
Context and relevance
This story sits at the intersection of tech growth, public finance and local impact. AI-driven demand is fuelling a datacentre boom, and many states’ generous incentives mean taxpayers may be subsidising infrastructure and environmental costs while the financial returns to the public are disputed. The article is relevant to policymakers, local authorities, utilities, community campaigners and anyone tracking the wider consequences of hyperscale cloud expansion.