State and senate representatives in the US states of Maryland and Arizona have separately introduced bills that would end data center tax breaks.

Arizona

In Arizona, Senate Bill 1463, which seeks to repeal the state’s transaction privilege and use tax exemption for qualifying large data centers, was introduced by Arizona Democrat and senate minority leader Priya Sundareshan.

Earlier this month, similar legislation was introduced to Arizona’s house of representatives. The bills require approval by two-thirds of each legislative chamber.

These bills reflect new directives from Arizona’s Democrat Governor Katie Hobbs, whose November-announced “middle-class” tax plan includes an end to the state’s tax breaks for data centers.

In her 'State of the State' address on 12 January, Hobbs urged lawmakers to “put the Middle Class Tax Cuts Package on my desk immediately.”

She added: “To pay for ongoing investments, I am proposing one key action: Make data centers pay their fair share for the water they use. The average Arizona family pays one cent for every gallon of water used in their home. If data centers were to pay the same amount, we could make a multi-million dollar deposit into the Colorado River Protection Fund every single year.”

“It’s time we make the booming data center industry work for the people of our state, rather than the other way around. If we are to be successful, we must rethink our state’s approach to data centers more broadly. More than a decade ago, we made a strategic decision to grow data centers by creating a tax exemption for them – I voted for it. Now, Arizona is a national leader in this sector. We must ask ourselves: should taxpayers continue subsidizing the data center industry?”

“I know my answer. My executive budget will eliminate the Data Center Tax Exemption, putting an end to a thirty-eight-million-dollar corporate handout. And I’m glad legislators in both parties agree with me – I can’t wait to get to work and get this done.”

Arizona introduced its data center tax breaks in 2013. Unlike other tax-incentive bills of the time, Arizona’s legislation didn’t focus on big-name single-tenant operators, instead offering breaks for both mega-scale tenant projects and companies providing colocation services out of multi-tenant facilities.

In 2021, the state voted to extend its data center tax break incentives for another 10 years.

Maryland

In Maryland, US representatives introduced House Bill 560, which seeks to repeal the state’s data center exemptions from the sales and use tax. This bill would also remove exemptions on “certain sales of certain personal property for use at certain qualified data centers under certain circumstances.”

Late last year, Maryland Democrat senator Chris Van Hollen was part of a group of Democratic US senators investigating whether the data center boom is causing electricity prices to rise.

Van Hollen later introduced legislation to the US senate that would require corporations to pay for data centers’ expansion and take measures to protect grid reliability.

In a statement, Van Hollen said: “Although they are not the only factor causing electricity prices to rise, it is clear that new data center energy demand is having a significant and growing impact on Americans’ utility bills.”

In a separate communication, Van Hollen said the country shouldn’t allow “uber-rich” companies to “privatize their gains but socialize the costs.”