Ohio Suspends Data Center Tax Break After Costs Blow Past Forecasts 11-Fold

Ohio, which has positioned itself as one of the country's primary data center destinations, suspended its sales tax exemption for new data center projects last week after the program's actual cost blew through budget estimates by more than an order of magnitude.

According to reporting by the Associated Press, Republican Gov. Mike DeWine issued the moratorium effective June 1. The suspension applies to new applications for the exemption, which covers not just construction materials but the hardware inside the facilities - server racks, cooling systems, and related equipment that operators tend to replace on roughly two-year cycles. That recurring equipment spend, not just the one-time build cost, is a key reason the numbers got so far out of hand.

The scale of the miss is hard to overstate. As reported by Fortune and confirmed in state figures, Ohio projected the exemption would cost $136 million in fiscal 2025 and $142 million in fiscal 2026. The actual figure was $554 million in 2024 and nearly $1.6 billion in 2025. That is roughly eleven times what the state's own budget analysts forecast just a year or two prior.

DeWine's office did not frame this as opposition to the industry. His spokesperson Dan Tierney, quoted by the Associated Press, said the governor wanted to pause new offers while a review process plays out, and DeWine separately cited roughly $37 billion in data center investment in Ohio over 2024 and 2025 as worthwhile. But the math forced the question.

The policy gap here is structural, not accidental. Ohio's exemption was designed in a different era of data center economics. The facilities built to run AI workloads are significantly more hardware-dense than the commodity cloud infrastructure that informed the original projections. More GPUs and accelerators per rack, faster refresh cycles, and higher power draws all compound the cost of a per-equipment tax break. The state's forecasting model simply did not account for how the composition of a data center's capital spending would change.

Ohio is not alone in confronting this. According to analysis published by law firm KJK, Georgia's data center tax incentive is currently running at roughly $2.5 billion against a budget estimate of $327 million. Pennsylvania's estimate of $45 million has grown to nearly $190 million. In Virginia - by most measures the largest data center market in the country - budget negotiations have been tied up for months over a Senate Democratic push to eliminate a roughly $1.6 billion annual break, as Fortune also noted.

The political picture in Ohio is further complicated by competing pressures. The state Chamber of Commerce and labor unions warned DeWine the pause risks pushing investment to competing states, according to the Associated Press. Texas, by contrast, is actively marketing itself as open to more data center development, per KJK's review of the multistate landscape.

At the same time, a citizen-led ballot initiative to ban new large-scale data center construction across Ohio entirely is collecting signatures, facing a July 1 deadline to gather more than 400,000 voter names. The bipartisan joint legislative committee formed to study data center impacts held its first hearings in May. DeWine is term-limited, which means any decision to lift or restructure the exemption will likely fall to whoever wins the November governor's race.

The core tension here is not really about data centers. It is about who prices the public infrastructure - power grid upgrades, water, roads - that a modern hyperscale facility consumes. States designed these exemptions to compete for investment. They are now discovering that the investment arrived faster and at a higher intensity than anyone modeled, and the subsidy machinery has no automatic brake.

Sources cited:
- Associated Press (via Fortune) (https://fortune.com/2026/05/29/ohio-data-center-tax-break-cost-explosion/)
- KJK | Kohrman Jackson Krantz (https://kjk.com/2026/05/28/ohio-halts-data-center-tax-incentive-amid-growing-debate/)
- Associated Press (via ABC News) (https://abcnews.com/Technology/wireStory/ohio-suspends-data-center-tax-break-tech-firms-133397079)