Repeal or Limit Corporate Tax Exemptions

Cities may consider limiting or banning corporate tax subsidies for data centers, especially as such restrictions relate to local property and sales taxes. 

If they have to be granted, local property-tax abatements should be short-term (research suggests not longer than three years¹) and should grant no more than 50 percent abatement of tangible and intangible property. Before granting any tax breaks, local officials should commission or perform independent return-on-investment or cost-benefit analysis of proposed incentives. Those studies should be available for public inspection at minimum 90 days ahead of incentive approval.

Note: State-level sales and use-tax exemptions abate both state and local sales tax portions. Localities must consult state law to determine any preemption concerns or conflicts.

1. Timothy J. Bartik, “Rethinking State Economic Development Strategies: Or, How to Maximize Benefits for State Residents’ Earnings per Capita,” W. E. Upjohn Institute for Employment Research, December 18, 2019, https://research.upjohn.org/cgi/viewcontent.cgi?article=1062&context=presentations. ↩︎