Governor Pillen’s Executive Order denying data center builders the same tax treatment that other businesses can receive under the ImagiNE Act could imperil the state’s entire economic future, according to National Taxpayers Union (NTU), which has recently launched a project analyzing the impact of data centers on fiscal policy.
“Public officials may try to deny it, but today’s Executive Order does constitute an effective moratorium on data centers in Nebraska,” NTU President Pete Sepp said. “Data center builders, who once believed they would be treated the same as other businesses under the terms of the Imagine Nebraska economic development program, will now be deterred from investing in the state. Other businesses are watching too, and wondering if they will be next on the chopping block from an unreliable government partner. Big mistake.”
Nebraska already enacted legislation to address one of the biggest public concerns over data centers—that the facilities’ power consumption could harm other ratepayers in the state, Sepp noted in June. But as recent studies published by NTU have shown, in most places, the presence of large industrial power users has actually stabilized, or even reduced, ratepayer costs, because so-called ‘hyperscalers’ are able and willing to invest in long-delayed grid upgrades that otherwise would have fallen on residential ratepayers.
Nebraska already grants only conditional exemptions from sales tax for data center equipment, whereas other, traditional manufacturing equipment is exempt “by right,” meaning that business taxpayers need not apply for an exemption from tax authorities, according to NTU Senior Fellow Jared Walczak, who is writing a series of papers for NTU on tax policies toward data centers.
“Raw materials and equipment used in the production of a good or service are traditionally excluded from the sales tax base, and for good reason,” Walczak said. “Otherwise, layer upon layer of sales tax would pyramid throughout the process, making the end product unaffordable to the consumer. Whatever the merits or drawbacks of Imagine Nebraska, today’s Executive Order worsens the discriminatory economic policies toward data centers in Nebraska.”
Walczak also recently coauthored a paper from the Omaha-based Platte Institute which argued, “The proper tax treatment of data centers is no different from that of any other type of business. Property taxes should be limited to real property (land and structures), not business tangible personal property (machinery and equipment). Sales tax should only apply to final transactions, not intermediate purchases (business inputs).”
NTU has established an online clearinghouse, “What Taxpayers and Policymakers Need to Know about Data Centers,” with a wealth of information and analysis on the topic at ntu.org/datacenters.
National Taxpayers Union is the only free-market organization for taxpayers that unites effective advocacy with useful research about how to limit taxes, spending, and regulation at every level and branch of government—state, federal, administrative, and judicial.