Indiana passed a new law offering any business that commits at least $750m towards building a data center in the state 50 freakin’ years of exemption from sales taxes, according to a Bloomberg report.
Since most local neighborhood tech startups don’t have $750m lying around, the legislation seems to be a clear effort to lure Google, Apple, or Facebook — all of which have data centers in other Midwestern states — to the Hoosier state.
Other states also offer incentives, but Indiana’s is in its own league
A total of 30 US states offer some kind of deal sweetener to encourage tech companies to build data centers within their borders.
But, in most cases, those incentives (usually tax breaks) expire in 10 years — maybe 15 — instead of a half century.
So the question is: Will Indiana’s offer be worth it?
First, the facts: Since Indiana’s sales tax is 7%, the deal would cost the state a guaranteed $70m in tax revenue (and potentially much more) if a company takes the bait for a $1b center. A data center of that size would also provide local construction companies with millions of dollars worth of contracts.
But, beyond those bare bones facts, opinions differ on the law’s ultimate impact in terms of dollars and sense…
- The case that it’s clever: Big tech companies are set to spend big bucks on data centers: In 2019 alone, Facebook, Google, and Apple plan to spend $16B, $13B, and $4.5B on data centers, respectively. So proponents of the plan argue that it will ensure a big chunk of that cash ends up in Indiana… and not elsewhere.
- The case that it’s crazy: The law doesn’t guarantee jobs for Indiana, so critics of the plan say it could cost the state hundreds of millions of dollars without providing jobs or protecting workers. Plus, many construction contracts could provide one-time benefits, while tax breaks represent 50 years of costs.
Despite the controversy, other Midwestern states now must decide whether they should offer similar incentives or sit this round out: Michigan legislators are currently debating a proposal to offer data center sales tax breaks through 2055.
So this is either the start of a Midwestern arms race for data center supremacy — or a 50-year headache for Indiana.
Want to read more about tech’s great migration to the Midwest? Check out this Hustle story about life in the “Silicon Prairie.”
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