ESSAY · 2026

Virginia lawmakers are celebrating a budget deal that will impose a new electricity tax on data centers — $0.011 per kilowatt-hour — projected to generate $1.2 billion over two years, or roughly $600 million a year. The headlines make it sound like a victory. The tech companies, for their part, have gone relatively quiet.

That silence should tell you everything.

THE NUMBER THEY DON'T WANT YOU TO COMPARE

Let's start with the math Virginia's press releases bury. In fiscal year 2025 alone, the state's sixteen-year-old sales tax exemption for data center equipment cost Virginia $1.6 billion in a single year — up an astonishing 118% from the prior year. That exemption was originally projected to cost $1.54 million per year when it was signed into law in 2008. The actual cost is now more than 100,000% above the original projection.

The arithmetic is stark: a tax break that began at $1.54 million a year has grown into a $1.6 billion annual giveaway — while Virginia families struggle to pay for childcare, health insurance, and a place to live. Senate Finance Chair Louise Lucas spent this budget cycle pressing to repeal that exemption outright, relenting only when negotiators agreed to defer the question to a workgroup that does not report until November 1.

Now compare that giveaway to the deal Virginia just struck. The annual sales tax exemption for FY2025 runs between $1.6 and $1.9 billion. Total exemptions given over FY2015–24 come to roughly $2.7 billion. Against that, the new electricity tax raises about $600 million a year, capped — leaving a net annual shortfall of more than $1 billion still favoring the industry.

Virginia is collecting $600 million per year from an industry it is simultaneously handing $1.6–1.9 billion in exemptions. The sales tax exemption stays intact, running through 2035. The workgroup studying whether to change that doesn't even report until November 1. In other words: the state just added a modest new fee while leaving the main giveaway untouched.

WHO ARE WE REALLY TALKING ABOUT?

These are not small businesses scraping by on thin margins. The primary tenants and operators of Virginia's hundreds of data centers are among the most profitable corporations in human history.

Amazon Web Services reached a $123 billion annual revenue run rate in Q2 2025, with operating income of $10.2 billion in a single quarter. AWS alone has at least 67 data centers across five counties in northern Virginia. Microsoft Azure generated $29.9 billion in cloud revenue in Q2 2025 alone, growing 39% year-over-year; Microsoft's total operating profit for fiscal year 2025 was $128.5 billion. Google Cloud earned $13.6 billion in Q2 2025, up 32%, and has committed a $9 billion investment in AI-ready Virginia facilities. Together, just these three companies generated roughly $75 billion in cloud revenue in a single quarter of 2025.

For these companies, a $600 million annual tax across the entire Virginia data center industry is a rounding error. AWS alone earns more than that in operating income roughly every two to three weeks. The tax is not a burden. It is a bargaining chip that was already priced in.

THE JOBS MYTH, BY THE NUMBERS

The data center industry has relentlessly sold Virginia on a jobs-and-growth narrative. Let's examine it. Virginia currently has 667 data centers and approximately 12,140 permanent data center jobs — an average of just 18.2 full-time jobs per facility. A typical 250,000-square-foot data center employs approximately 50 full-time workers, about half of whom are contract employees.

According to Food & Water Watch, the investment required to create a single permanent data center job in Virginia is nearly 100 times greater than for other industries. Virginia data centers generate just one permanent job for every $13 million invested, compared to $137,000 per job in other sectors.

Construction employment is real — but temporary. At the height of construction, approximately 1,500 workers are on-site from various trades. Once the ribbon is cut, most of them move on. The enormous, humming buildings left behind are staffed by skeleton crews. Meanwhile, as of 2024, the entire U.S. data center industry — which consumes more than 4% of all electricity in the country — employs as few as 23,000 permanent workers nationwide, representing just 0.01% of total U.S. employment.

Virginia has traded $2.7 billion in tax exemptions over FY2015–24 for an industry that averages 18 permanent jobs per building. By any honest economic measure, that is a catastrophic return on public investment.

YOU ARE PAYING THEIR ELECTRIC BILL — WHETHER YOU KNOW IT OR NOT

The data center industry does not just benefit from tax exemptions. It is reshaping Virginia's entire energy system — and ratepayers are absorbing the cost. Dominion Energy has received data center power requests totaling 70,000 megawatts — nearly triple the utility's all-time peak load of 24,678 MW recorded in January 2025. Virginia data centers alone already consume the equivalent of 25% of the entire state's electricity needs.

The infrastructure to meet that demand doesn't build itself. Virginia ratepayers may bear more than $440 million in costs over the lifetimes of two major transmission projects — the Mid-Atlantic Resiliency Link and Valley Link — even though that capacity primarily serves data centers. Dominion implemented rate increases in 2026 after State Corporation Commission approval, adding approximately $11 to $13 per month to a typical residential customer's bill. A bill that would have prevented utilities from passing data center infrastructure costs to other customers was quietly carried over to 2027.

Here is what that means in plain language: Virginia families are subsidizing not just the tax breaks these companies receive — they are also underwriting the electrical infrastructure those companies need to operate.

THE WATER NOBODY IS ACCOUNTING FOR

Then there is water — and this is where the conversation becomes most personal for communities across Virginia, including ours. Data centers in four Northern Virginia counties — Fairfax, Loudoun, Prince William and Fauquier — used more than 1.85 billion gallons of water in 2023, up from 1.13 billion gallons in 2019, a 63% increase in four years. Statewide, JLARC put 2023 use at about 2.1 billion gallons. In Loudoun County alone, data centers increased their water use by 250% between 2019 and 2023, consuming 900 million gallons in a single year.

On the hottest peak days, data centers already draw an average of 14 million gallons per day from the Potomac River. With unchecked growth, that figure could balloon to 170 million gallons per day. By 2050, data center demand in the Potomac River Basin alone could consume 33% of available river water. A single large data center can consume more water daily than 1,000 typical households; Virginia Tech experts have warned that the largest facilities use as much water as a small city.

This water is not purchased. It is drawn from rivers, aquifers, and public water systems that communities, farms, and ecosystems depend on — often in areas already identified as water-stressed, including areas experiencing ongoing drought. The new electricity tax says nothing about water. There is no water impact fee. There is no mandatory compensation to downstream communities. There is no mechanism for rural Virginia — where our watersheds originate — to recover anything at all.

THE RETURN ON INVESTMENT VIRGINIA NEVER SHOWS YOU

Virginia's own independent auditors at JLARC have found that for every dollar of sales tax abated through the data center exemption, only 48 cents is returned to the state budget. That is a negative return of 52 cents on every dollar given away. Georgia's independent audit found an even worse outcome: data centers there receive $50 million in sales tax exemptions but generate only $15 million back — a 70% negative return on investment.

The Data Center Coalition, for its part, argues that the industry generated $2.1 billion in total state and local tax revenue in fiscal years 2024 and 2025. But that figure must be weighed against $1.6–1.9 billion in sales tax exemptions granted in FY2025 alone, $2.7 billion in exemptions over FY2015–24, $440 million or more in ratepayer-subsidized grid infrastructure, billions of gallons of public water drawn with no compensation, foregone revenue in local property taxes via abatement programs, and the long-term environmental remediation costs no one has yet priced.

The industry is not a net contributor to Virginia's public finances. It is a net beneficiary — by a wide margin.

WHO IS THE $1.2 BILLION ACTUALLY FOR?

The new tax deal will generate $1.2 billion over two years — earmarked for teacher raises, healthcare support, SNAP administration, transit, and federal funding gaps. This is real money for real needs, and it is welcome. But let's be clear about why those needs are so acute.

Virginia has a $3 billion increase in Medicaid costs driven by managed care contracts. It needs $150 million to replace health insurance subsidies that the Trump administration let expire. It needs $135 million for a new state share of food assistance mandated by the federal tax package. Virginia is having to scramble for revenue to cover basic human needs because federal support is collapsing — and the industry that has consumed more than half of all state economic incentive spending over the past decade is being asked to contribute the equivalent of roughly one-third of what it was given in exemptions last year alone.

The companies will absorb it. Their lobbyists have already called it "manageable." Not a single hyperscale data center will close. Not a single server rack will go dark. Amazon's quarterly operating income from AWS is approximately five times larger than this annual tax.

WHAT A REAL ACCOUNTING WOULD LOOK LIKE

A genuinely fair reckoning with Virginia's data center industry would include full repeal — not deferral — of the sales tax exemption, which the Senate correctly called a blank check that has spiraled from $1.54 million to $1.9 billion in less than two decades. It would include water impact fees tied to actual consumption, with revenues directed to watershed protection, rural water system maintenance, and drought resilience. It would include full cost separation on grid infrastructure, so that no ratepayer subsidizes transmission, substation, or distribution upgrades built primarily to serve data center demand.

It would include mandatory local benefit sharing — a percentage of state data center tax revenues directed to the localities bearing the environmental, infrastructure, and quality-of-life burdens. It would include transparent, company-level disclosure of which corporations receive which exemptions, something Virginia currently does not disclose publicly. And it would include community veto rights over new data center proposals that exceed defined water, land, or noise impact thresholds.

THE BOTTOM LINE

Virginia has spent sixteen years building what is now described as "the data center capital of the world." The price of that distinction is $2.7 billion in foregone taxes, 1.85 billion gallons of water consumed annually across four Northern Virginia counties, a grid being rebuilt at ratepayer expense, and communities from Northern Virginia to the Shenandoah Valley living next to industrial facilities that were never asked to fully pay their way.

The deal's architects framed it as a win for working families. In a joint statement, Senator Lucas and House Appropriations Chair Luke Torian called the agreement a reflection of "our shared commitment to making Virginia more affordable for families," describing it as a conference report that makes "historic investments to lower costs, strengthen our schools, protect access to healthcare, expand economic opportunity, and maintain the Commonwealth's strong fiscal foundation." Those investments are real, and they matter. But it is worth asking what was left on the table to secure them.

The new $600 million annual electricity tax is not a reckoning. It is a concession — reached only because a budget deadline loomed and lawmakers could not agree fast enough on a broader compromise. The sales tax exemption, the biggest giveaway of all, lives on.

The companies know this. That is why they went quiet. Virginia's communities deserve to understand what their state actually traded away — and what a genuine accounting would demand in return.

These are not abstractions — they are decisions being made right now, including close to home. See what it means for Augusta County, Virginia →