Politics

Ohio Axes Data Center Tax Break After Billion-Dollar Forecasting Error

Screen Capture/CSPAN

Ohio Republican Gov. Mike DeWine is pausing a tax break for data centers after it end up costing more than $1 billion more than lawmakers expected.

The Ohio Department of Taxation forecasted that the state would give up $136 million in tax revenue in 2025, but it ended up being around $1.5 billion, The Plain Dealer reported. On Thursday, DeWine ordered the Ohio Tax Credit Authority to stop accepting new data center tax exemption requests as Ohio lawmakers investigate the forecasting error and the industry’s exponential growth.

Ohio is one of the nation’s data center hotspots with over 200 locations throughout the state. The tax break has allowed Ohio to be competitive with other states in attracting the facilities that power artificial intelligence (AK) chatbots, according to the Associated Press.

This is not the first time a tax forecasting error has occurred in Ohio. In 2024, the sales tax exemption cost Ohio $554 million, the outlet reported. The Department of Taxation appeared to rely on historical data for its predictions.

Lawmakers from both sides of the aisle expressed skepticism about the numbers being so far off from what was forecasted.

“It’s alarming that the state’s forecasting so woefully underestimated the cost of this tax break and that we are just now finding out about it,” State Senate Democratic leader Nickie Antonio said, according to The Plain Dealer.

“Every member of the general assembly should be furious over this,” Republican Ohio State Sen. Bill Blessing said, the outlet reported.

Ohio has sales tax agreements with 18 data center companies, and the earliest deals gave 100% sales tax exemption for 40 years. More recent deals have narrowed it down to 50% for 15 to 20 years in a more “targeted approach,” Lydia Mihalik, a Republican, Ohio Department of Development Director, said, according to The Plain Dealer

Blessing introduced legislation last July to end the tax exemption, and lawmakers added it to the state operating budget, but then DeWine vetoed it, arguing that the tax break was necessary for economic development, the outlet reported. Ohio State House Republicans are still planning on moving forward with a veto override vote.

“As the Governor recently noted, during 2025, the entities that received the $1.5 billion in sales and use tax benefits reported a total capital investment of $27.2 billion, showing a significant return on investment for Ohio,” a spokesperson from DeWine’s office told the Daily Caller News Foundation. “Also noted in the Governor’s recent statement, this pause reflects multiple factors, including increased utilization of the tax credit over the last year, the maturity of the data center industry in Ohio, and the recently formed legislative study committee.”

“Data centers are a critical component to today’s technology-driven economy, which depends on the virtual, large-scale exchange of information,” DeWine said in a Wednesday statement. “One of the reasons Ohio has been so successful in attracting new businesses and creating new jobs is that we have invested in the data infrastructure needed to support complex technological innovation.”

“Data centers that have previously been granted sales and use tax benefits in Ohio have reported a total capital investment of $27.2 billion in 2025,” the governor added.

DeWine’s decision on the tax break will not void existing agreements or stop future centers from being built, The Plain Dealer reported.

If Ohio were to resume the tax break, it would happen under a new governor since DeWine is term-limited. Republican Ohio gubernatorial nominee Vivek Ramaswamy has discussed his desire to turn the Ohio River Valley into the next Silicon Valley, evolving the region from “Rust Belt” to the Platinum Belt.

Ramaswamy is currently locked in a competitive race with Democratic gubernatorial nominee Amy Acton.

“Ohio is facing a huge opportunity to lead, and making ourselves less business-friendly is not the way to maximize it,” Steve Stivers, Ohio Chamber of Commerce President and former Republican member of Congress, said according to The Plain Dealer.

DeWine’s spokesperson, Dan Tierney, said that the governor “felt it was the right time to let the citizens know, let businesses know that we’re going to pause on new offers of this tax incentive while that process plays out,” the AP reported.

Thirty-eight states have some form of a sales tax break for data centers, according to the outlet.