The Republican governor of Ohio, Mike DeWine, has decided to pause the state’s data center tax cuts after realizing they have cost significantly more than anticipated—over $1 billion more, to be exact.
This was quite a surprise, as the Ohio Department of Taxation initially expected a tax revenue loss of about $136 million for 2025, but the actual figure turned out to be around $1.5 billion, according to The Plain Dealer. On Thursday, DeWine instructed the Ohio Tax Credit Authority to halt new applications for data center tax exemptions while lawmakers look into the forecasting mistakes and the rapid expansion of the industry.
Ohio has become a key player in the data center sector, hosting around 200 locations statewide. This tax incentive has helped attract companies that support technologies like artificial intelligence. It’s an important competitive edge, as noted by various sources.
However, this isn’t the first time Ohio has faced issues with tax projections. The anticipated cost of the 2024 sales tax exemption is pegged at $554 million. It seems the Taxation Department might be relying on outdated data for their estimates.
Lawmakers from both parties have shown disbelief over the significant gap between expected and actual numbers. State Senate Democratic Leader Nikki Antonio described the situation as alarming, while Republican Senator Bill Blessing expressed that every lawmaker ought to be outraged.
Currently, Ohio has agreements with 18 data center companies that originally offered a full sales tax exemption for 40 years. The most recent negotiations have reduced this to a 50% exemption over 15 to 20 years, aiming for a more focused approach, as stated by Ohio Department of Development Director Lydia Mihalik.
Last July, Blessing introduced a bill to repeal these tax cuts, but DeWine vetoed it, believing it was essential for economic development. Republicans in the state are now contemplating an override vote.
A spokesperson for DeWine highlighted that businesses benefiting from these incentives reported a total capital investment of $27.2 billion for 2025, suggesting a favorable return on investment for Ohio. DeWine himself noted that data centers play a vital role in the technology-driven economy, enabling efficient information exchange.
Notably, DeWine’s decision to pause the tax cuts won’t affect existing agreements or stop future data center construction, as reported. Resuming the tax cuts would likely fall to a new governor since DeWine has completed his term. Republican gubernatorial candidate Vivek Ramaswamy has expressed ambitions to transform the Ohio River Valley into a tech hub akin to Silicon Valley.
As the state approaches a potentially significant moment for growth, Steve Stivers, head of the Ohio Chamber of Commerce, asserts that becoming less business-friendly isn’t a strategy for maximizing opportunities.
Dan Tierney, a spokesperson for DeWine, emphasized that this pause allows for proper public and business awareness during the ongoing process. It’s worth noting that 38 states currently provide some form of sales tax reduction for data centers.
