Ohio suspends costly data center tax breaks amid budget concerns

Ohio is halting a major tax break for data centres, a decision announced by Republican Governor Mike DeWine. The move comes as the cost of the exemption has surged far beyond original forecasts. Critics argue the pause could push tech investments to other states. The tax exemption, covering construction materials and high-cost equipment, was meant to help Ohio compete with other states. Initially projected to cost $136 million in 2025 and $142 million in 2026, the actual figures exploded to $554 million in 2024 and nearly $1.6 billion this year. DeWine’s office pointed to these rising costs and a recent legislative study as key reasons for the suspension.

Across the U.S., 38 states currently offer some form of sales tax break for data centres, according to the National Conference of State Legislatures. But the policy has faced increasing backlash from governors and lawmakers over its financial impact.

Meanwhile, a separate push to ban large data centre construction in Ohio is gaining momentum. Organisers have until 1 July to collect over 400,000 voter signatures to place the issue on the November midterm ballot. The measure could become a campaign topic for the state’s next governor, with Republican nominee Vivek Ramaswamy and Democratic nominee Amy Acton potentially facing the question.

Business groups and labour unions have warned that scrapping the tax break could drive tech-sector jobs and investments away from Ohio. They argue the state risks falling behind in a competitive industry if the incentives disappear. The suspension of Ohio’s data centre tax break takes effect immediately. With costs ballooning and a potential ballot measure looming, the decision will likely shape the state’s economic strategy for years. Lawmakers and the next governor may need to balance fiscal concerns with the risk of losing tech investments to rival states.