Take the Tax Foundation's figure at face value: a $5 billion data center can easily spend more than a billion dollars a year on machinery and equipment, which makes sales taxation a significant consideration in where it gets built [7]. That billion is 20 percent of the build price, recurring annually, in purchases the state has agreed not to tax [4]. Illinois writes its exemption for as long as 20 years [12], so a full term covers something like $20 billion of equipment against a $5 billion building, four times the thing the ribbon was cut on [5]. That is the comparison a legislature would want in front of it, and the Illinois Department of Commerce and Economic Opportunity stopped putting an annual revenue-loss number in its Data Center Investment Program report in FY2023 [10], across the same span in which awarded projects went from six to 27, a 4.5-fold increase, or 21 more sites carrying the exemption [9][3].
The reason the give-back compounds instead of amortizing is the equipment schedule. Electrical systems, batteries and structures have usable lives past 20 years, while the compute inside them can turn over in as little as three under AI strain [6]. So the exemption is indexed to refresh cadence, which is the one variable in this whole business that has been accelerating.
Breadth is the other half of it. Nearly three-quarters of states run some version of the incentive, spanning sales and use tax, property tax and financial transactions tax [1], which is roughly 37 states with about 13 abstaining [1], across a national installed base of nearly 5,000 facilities in all 50 states [2]. The thresholds are the only real dial and they are not moving together: Texas at $200 million of capital investment [3], Illinois at $250 million, or 25 percent more [13][7], Maine on square footage and some states on employment metrics [4], New York with no minimum at all and eligibility reaching property, services, equipment and contracts [5]. Illinois also stacks a 20 percent income tax credit on construction wages on top of the equipment exemption [11].
My view, and it is probably wrong in the specifics: what binds the next site is not the size of the exemption but whether anyone can price it, because a program with no published cost can be repealed on a hunch and defended only on anecdote, and Good Jobs First counts at least 14 states that failed to disclose data center abatement losses at all [8], something like 37 percent of the states running programs [2]. Fortune reports states have already rolled back previously aggressive incentives [16]. The counter-thesis is respectable and may simply be correct: sales tax is a rounding error against the price and timing of power, which this reporting does not touch, and if JLL's 14 percent compound growth through 2030 holds [14], the sector is about 1.7 times its present size by then [6] whatever any statehouse decides. Two things would settle it. A state that publishes a nine-figure annual loss and leaves its program untouched, or a hyperscaler filing for a site where the exemption has already expired. Until then, note what Illinois is not doing: building the record it would need either to justify 27 awards or to stop granting them [10].
