Texas lawmakers scrutinize multibillion-dollar data center tax break

The Texas Legislature created a tax exemption in 2013 to attract large data‑center projects, promising billions in private investment while forgoing only modest sales‑tax revenue. Recent projections show the incentive could now cost the state several billion dollars in the upcoming budget cycle as the sector has surged, driven by artificial intelligence and cloud computing.

During a hearing of the Texas Senate Finance Committee, chief revenue estimator Brad Reynolds said, "The early estimates are significantly too low to begin with," noting that the original projection of nine qualifying projects investing $2.7 billion was eclipsed by actual investments exceeding $9.1 billion. Senator Paul Bettencourt added, "The cloud exists… not in the atmosphere, but in all these data centers," highlighting the rapid expansion since the exemption was expanded in 2015. Lawmakers are reviewing whether the tax break continues to benefit Texas ahead of the 2027 legislative session.