RICHMOND, Va. — Dozens of trades workers rallied at the State Capitol on Thursday, pushing back against a Senate budget proposal that would eliminate a sales tax exemption for data centers in Virginia.
Union members representing electricians, plumbers, and pipe fitters said data center construction has been the driving force behind a decade of job growth.
"In 2016, we worked 14 million hours. And just last year, we worked 28 million hours," said Don Slaiman, Director of Community Relations for IBEW Local 26. "And this is in the face of rising interest rates where there's a lot less commercial office construction, a lot less construction overall. So, all of our growth has been generated by this industry."
"The data center industry was born in this Commonwealth and we want to keep it here," he added.
Workers said losing the exemption could push the industry to other states, taking their jobs with it.
The Senate's proposed budget recommends getting rid of the sales and use tax exemption for data center computer equipment and software on January 1, 2027.
"Let's just keep this incentive in this area so our people don't have to travel, so we can stay here, take care of our families and raise our children right here in Virginia, where we from," Dorian Hargrave with IBEW 80 said.
"We've already been doing a great job keeping that work and trying to keep that middle-class American Dream going for all of us. And I say, why stop now?" Kwaku Afriyie, an IBEW Local 26 member, said.
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The push to eliminate the exemption is being led by Senate Finance Chair Sen. Louise Lucas, a Democrat from Portsmouth, who says the tax break has grown far beyond what was originally anticipated.
A fiscal impact statement from 2008 estimated the exemption would amount to $1.5 million. But a recent state reportfound data centers purchased over $33 billion worth of equipment in the last fiscal year — saving $1.9 billion in taxes.
"They can keep building them. They just need to pay their fair share in taxes, that's all," Lucas said.
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Lucas said the Senate budget proposes directing some of that recovered revenue toward transportation and other priorities.
"Any number of items that affect hard-working Virginians and I want that money to go back to them," Lucas said.
Not all lawmakers agree. Senate Minority Leader Se. Ryan McDougle (R-Hanover) the state made a commitment to the industry that should be honored.
"Virginia made commitments to certain businesses, whether we like those commitments later on, should not be the question. When you make a commitment, you should live by it," McDougle said.
The House version of the budget takes a different approach — keeping the exemptions in place but requiring data centers to meet certain clean energy standards.
Del. Luke Torian (D-Prince William), who chairs the House Appropriations Committee, said the local tax revenue data centers generate is critical to the county he represents.
"My locality depends on those resources tremendously. So we'll have a robust conversation about where we're going to go with that," Torian said.
Gov. Abigail Spanberger weighed in on the debate following an event a Virginia poultry farm event Tuesday, saying data centers should pay their fair share — but that the full picture needs to be considered.
"Many communities across Virginia want to welcome data centers as businesses as frankly, local revenue that is very important. So there are many more conversations to be had, and I don't think that I was going to make a poultry pun. I don't think that chicken is fully cooked yet, if you will," Spanberger said.
Both chambers passed their respective budgets Thursday.
The two sides will now enter a conference process to work out a compromise, where it remains to be seen which — if any — of these competing approaches will make it into the final budget.
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