Should data centers get tax breaks? It's a hot issue in the race for CT governor
Republican Ryan Fazio wants to repeal subsidies for data centers – but not ban them altogether.
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Data centers are controversial across the country – and becoming a political liability for political candidates.
Now they’re an issue in Connecticut’s race for governor.
Republican Ryan Fazio is calling for an end to data center tax breaks – but not the centers themselves – a position that could put him at odds with the Trump administration.
PROMISE VS. REALITY
Massive data centers promise lower property taxes and construction jobs.
“In terms of skilled trades to build all the data centers that we need. And that’s going to be hundreds of thousands, and maybe millions, of jobs,” Meta CEO Mark Zuckerberg told the G20 Innovation Ministerial in North Carolina this week. “The demand for data centers is immense.”
But the benefits can be temporary.
Data centers can suck up water and electricity, raising everyone else’s bills. Politicians on both sides of the aisle are now calling for guardrails on the rapidly growing industry.
“The old expression, ‘If you’re not at the table, you’re on the menu,’” Fazio said.
TAX BREAKS
Fazio is promising to repeal a state sales tax rebate for data centers. The bipartisan law passed in 2021 – at Gov. Ned Lamont’s urging – in hopes of making Connecticut a player in the tech industry.
Companies building data centers can reduce their sales taxes – and even local property taxes. So far, only one company has taken advantage of the subsidy, Cigna Health in Windsor.
That’s where Fazio made his announcement.
“Seventeen million dollars in a special tax subsidy for a data in Windsor – paid for by you, the taxpayer,” he said.
Lamont argued that Cigna’s $386 million investment is paying off.
“If Ryan wants to raise taxes on Cigna, I don’t,” the governor said.
The state must approve data centers. Lamont argued that he has rejected projects that would strain critical resources.
“I’m the guy who said no,” he told reporters. “We’ve said no to all those hyperscalers, which is where I think most people are concerned. Hyperscalers are the big things; they've built something like 40 of them in northern Virginia. Drives up the price for electricity."
CROSSHAIRS WITH TRUMP?
Republicans like Fazio are in a difficult position.
Polls show that voters increasingly oppose massive data centers, but President Donald Trump is pushing hard for them.
“The only reason that communities throughout the U.S.A. should not want Data Centers is if they want to end up being backwards and poor,” Trump posted on social media this week. “If they want to be successful and rich, with far lower taxes and jobs all over the place, let Data Reign. The good news is that there are plenty of other places that want them.”
Vice President J.D. Vance also criticized data center opponents.
"We cannot be a country that says we're not going to build anything anymore," he said this week. "With this backlash on data centers, I think that it is downstream of the fact that the United States doesn't build enough power ... It's going to come online really fast under the president's leadership."
Fazio is threading that needle carefully.
He insisted that he doesn’t want to ban data centers altogether, but doesn’t believe they should receive tax breaks either.
“We’re calling to end this special tax benefit for data centers to put guardrails on the industry and to require that they bring their own power,” Fazio said.
On that point, Lamont agrees.
“I see how much electricity they suck; I see these are not necessarily long-term employment projects,” the governor said. “But by the same token, if somebody wants to come in, maybe with their own power, maybe they’ll come in alongside of us for modular nuke or hydro, that’s the type of thing we ought to be able to talk about.”
A new state AI Governance Board is looking at how other states are regulating data centers and will make recommendations to state lawmakers.
