I have been very open about my belief that datacenter developments done well have the potential to be a transformative force for good in our state. My overall goal has been to ensure that our state and our communities have complete and accurate information before they make their decisions. And that they follow a good, transparent process to arrive at those decisions.
In Wisconsin, as in 30+ states, the laws are written to make the state attractive to potential datacenter developments. Wisconsin’s primary tool for attracting datacenters, like in many states, is a tax exemption on certain items. In lay person’s terms, this exemption means that the state promises not to tax certain things and that, in turn, incentivizes the qualified datacenter to locate in the state in reliance on that promise. This policy was enacted in a bipartisan way, signed into law by Governor Evers.
The wisdom of this exemption is likely to be debated in the upcoming state budget and it is critically important that we understand it accurately and place it within the broader national context.
Key Point One: It is very likely that without a competitive tax code there would be no large scale datacenters in Wisconsin. The exemption is why Wisconsin is in the game. Those who don’t want datacenters will likely target the exemption for complete elimination and offer no alternative incentives to replace it.
Key Point Two: Calling a tax exemption in this circumstance a “subsidy” is a misnomer. “Subsidy” implies that there is a payment out of our coffers to some datacenter, such that there is a true opportunity cost to the state. It gives the inaccurate impression that some pool of tax dollars could have been spent by the state on other priorities but instead was passed up in favor of having a datacenter.
A promise not to tax is not a “subsidy” at all when the $35B+ in investment in the state would have likely never happened in the first place, but for the existence of the exemption. Without the exemption, it is entirely likely that the status quo ante would persist and the land on which today’s datacenters are being built would still be sitting vacant, generating relatively meager tax revenue for WI and the community. There is no lost pot of money. It is a fiction. It never existed and it likely never would have existed.
Key Point 3: In my view, the only financial opportunity cost at risk in the upcoming tax exemption debate is actually the tens of billions of dollars in potential future investment in the state, together with all the commensurate growth in jobs, manufacturing, property tax base, income tax revenue, and potentially transformative funding for non-profit social services and environmental and community organizations.
Are we as a state willing to give those things up, particularly when, from a tax standpoint, our opportunity to have them costs essentially nothing?
