Tommy Washbush / Freepik
Data center servers in the shape of a dollar sign on a map of Wisconsin.
One of the hottest issues in Wisconsin right now is the proliferation of data centers. A recent Marquette Law School poll found that a whopping 70% of Wisconsinites think these things are more trouble than they’re worth and that’s up from just 55% who thought the same thing only last October.
That jump in unfavorability is probably due to the number of proposed projects that have popped up in recent months. While data centers are being sited all over the country, Wisconsin is especially attractive for its abundant water, relatively inexpensive land and, at least until recently, modestly priced energy.
Projects are being built in Mount Pleasant, Port Washington and Beaver Dam while others are being debated in the town of Beloit, Janesville, Kenosha and Menomonie. A controversial proposal in DeForest was recently rejected by the village board.
Data centers — which are massive computing banks mostly needed for artificial intelligence — are controversial for good reason. On the one hand, they can be attractive to cash-strapped local governments because they increase the property tax base while not demanding much in the way of services. But on the other hand, they require lots of land, water and electricity. Some communities also worry that the scale of these projects will negatively impact their small town character. Data centers create lots of good-paying construction jobs, but they don’t generally provide a lot of permanent jobs to run them.
So, whether or not to accept a data center is a local decision. Some communities will weigh the tax base gains and the relatively low impact on services against the costs and conclude that the project is still worth it. Others will make a different choice. That’s the way it should work.
What I don’t get is why the state of Wisconsin should be providing a tax subsidy to build data centers.
That’s right, as reported back in September by The Center Square, Wisconsin taxpayers spent $40 million in 2024 to subsidize the construction of data centers. (Ironically, when I asked the question to AI, it told me the total was $70 million, probably because that $40 million figure only covers one year of the biennium.) That's because a provision in the 2023-2025 state budget created a sales and use tax exemption for these things. The exemption is broad, covering everything from computer hardware and software to office furniture. And this amount well exceeded the fiscal estimate when the bill was passed, which was only $8.5 million. It’s a safe bet that in future two-year budget cycles the price tag will top $100 million.
This provision was passed by the Republican Legislature and signed into law by Democratic Gov. Tony Evers. So, it was bipartisan boosterism.
But here's a question: why?
Amazon, Microsoft and Google — the major players in these projects — can afford to pay a sales tax on their computers, bricks and mortar, desks and carpeting. Nobody picks a site for a data center based on the rounding error that is a state sales tax. As mentioned above, they pick the site based on factors like availability of land and water and the cost of electricity.
It's one thing to deal with these big, disruptive projects as they try to gain local approval. It's quite another for the state to needlessly encourage them with a tax break.
And to make matters worse, data centers can also be subsidized with tax incremental financing. That’s when a city freezes the tax base for a given development and plows all the new revenues created by it into subsidies to benefit the project, like roads, parking and utility work. To make matters still worse, the Legislature has provided exemptions to dollar limits for these TIF subsidies in some specific communities. Again, Meta, Google and Microsoft can afford to pay for their own roads and other infrastructure. Just as the state sales tax exemption is needless, so is TIF.
Now, let me emphasize right here that I am no Luddite when it comes to artificial intelligence. I use it to research my various writing projects and I find it to be an incredibly powerful and mostly reliable tool. Some say AI will be as big as the industrial revolution, with massive disruptions, big gains and huge costs. The jury’s still out on that. I don’t know what it will mean. Nobody does.
What I do know is that it’s here and it’s only going to get bigger. And it will demand the computing capacity that can only come with data centers. But they should only be built in communities which accept them based on a transparent process with all the information available so that benefits and costs can be fairly evaluated.
And there’s just no reason on earth why they should be subsidized with a tax break. So, what if that taxpayer handout was repealed and that $100 million or so was invested in something worthwhile. I don’t know, maybe affordable child care?
This seems like an issue ripe for picking by a Democratic candidate for governor. In any event, and especially given the response in the Marquette poll, this should be a subject for debate among those candidates and in the wider public square.
Dave Cieslewicz is a Madison- and Upper Peninsula-based writer who served as mayor of Madison from 2003 to 2011. You can read more of his work at Yellow Stripes & Dead Armadillos.
