Georgia Gov. Brian Kemp Vetoes Bill to Pause Tax Breaks for Data Centers
ATLANTA- In an unexpected turn of events, Georgia Governor Brian Kemp vetoed a bill that would have put a two-year hold on a tax exemption for building and equipping computer data centers. This decision comes after a heated debate and lobbying efforts to preserve the tax break for businesses.
The vetoed House Bill 1192 aimed to temporarily pause a sales tax exemption provided by the state for data centers, but Kemp’s decision to reject the bill indicates the challenges of eliminating established tax breaks. According to Greg LeRoy, the executive director of Good Jobs First, creating tax breaks leads to the formation of a self-interested lobby around them, making it difficult to repeal.
Governor Kemp justified his veto by stating that businesses had already made plans for data centers utilizing the tax exemption, and a sudden freeze on July 1 would disrupt investments made by high-technology data center operators and inhibit infrastructure and job development. This move reflects similar disputes in other states like Virginia and Arkansas, where concerns over the proliferation of data centers and their impact on the environment and power grid have been raised.
The opposition to data centers in Georgia has proposed measures like banning data centers near transit stations and hiking trails, as well as halting local property tax abatements on top of the state sales tax break. While data centers bring in significant investments, they typically create few jobs, prompting calls for more scrutiny on these tax incentives.
The bill to freeze the data center tax exemption was the only legislation that advanced following a comprehensive review of all tax breaks offered by Georgia to various industries. Lawmakers had earlier attempted to cap the significant amount spent on income tax credits for movie and television production but abandoned the effort. The increase in data centers in Georgia has strained the power grid, prompting urgent calls for new electrical generation capacity from Georgia Power Co.
The International Energy Agency predicts a doubling of electrical consumption from data centers worldwide by 2026, emphasizing the need for energy efficiency. Environmental groups have raised concerns about the tax exemption benefiting data centers fueled by natural gas, leading to increased fossil fuel emissions and water usage for cooling their systems.
The bill also sought to establish a committee to study the impact of data centers on the electrical grid. A 2022 review projected that Georgia would forgo $307 million in revenue from 2024 to 2030, compared to the sales taxes collected from data center activities. The legislature’s failure to pass the bill has implications for future tax reforms, especially regarding Lt. Gov. Burt Jones’ proposal to reduce the state income tax rate for all residents and businesses.
While Senate Finance Committee Chairman Chuck Hufstetler expressed disappointment in the slow progress of tax break scrutiny, he remains committed to revisiting the issue next year. The challenge of eliminating tax breaks highlights the complexity of tax policy and the influence of business interests in shaping economic development incentives.
It seems that the news article is discussing Georgia lawmakers’ efforts to restrain tax breaks for data centers, but Governor’s veto ultimately saved a tax break for a data center. The article may provide information about the debate surrounding tax breaks for data centers in Georgia.