Ohio Governor Mike DeWine moved on Friday to suspend the state's datacenter sales-tax exemption program for new applicants, a sharp turn for a state that has spent five years marketing itself as the next great hyperscale frontier. The Tax Credit Authority has been instructed to stop considering fresh exemption requests while an industry impact review runs. Existing approved projects, including Amazon's central Ohio campus expansion and Google's New Albany footprint, retain the deals they have already negotiated.
The proximate cause is a budget hole that nobody in Columbus had modeled honestly. Good Jobs First, which tracks subsidy programs across all 50 states, now estimates Ohio gave up more than $1.5 billion in sales tax in 2025 alone through the program. The state's own forecast at the start of the year was $136 million. The 2024 number came in at $555 million, also roughly four times the official projection. Two consecutive years of order-of-magnitude undercounting made the policy politically indefensible at a time when Ohio is cutting school and Medicaid spending.
The exemption itself is broad. It removes sales and use tax on building supplies for data hall shells, server racks, switchgear, cooling plant and most of the auxiliary infrastructure a hyperscale site consumes. Because each new generation of GPU-dense capacity pushes per-rack capital cost higher, the per-square-foot value of the exemption has compounded faster than legislators assumed when the rules were last refreshed.
Ohio is the newest entrant in what subsidy watchers now call the billion-dollar losers' club, joining Virginia, Texas and Georgia. Virginia, still the densest datacenter market on the planet, is the cautionary tale: the Commonwealth is grappling with grid constraints in Loudoun and Prince William counties while continuing to forgo more than a billion dollars a year in tax revenue. Georgia is on track for $2.5 billion in 2026 exemption costs, and Indiana is running at $655 million annually, of which $561 million flows to Amazon alone.
There is a transparency dimension that operators should not ignore. Good Jobs First reports that 36 US states exempt building materials and IT equipment for datacenters from sales or use taxes, but only five states publicly disclose the estimated or actual cost. The group argued in April that many jurisdictions are violating Generally Accepted Accounting Principles by failing to disclose the forgone revenue in their annual financial reports. We expect this disclosure argument to migrate into investor and ratepayer challenges over the next year, particularly in states where utility commissions are being asked to approve generation buildouts tied to specific hyperscale loads.
The political base is also organizing. Ohio Residents for Responsible Development collected 25,000 signatures in five weeks for a proposed constitutional amendment that would ban any datacenter consuming more than 25 MW. Similar ballot efforts are now being prepped in Nevada, California and Maryland. A 25 MW ceiling would effectively zone out the entire AI training class of facility, which today routinely lands between 100 and 500 MW per campus.
For cloud architects and infrastructure leaders, three operating consequences follow. First, regional capacity risk is no longer just about power, water and fiber. We now need a tax and ballot risk overlay on every US region we plan to commit to for multi-year reserved capacity. Second, hyperscaler list pricing in affected regions is likely to drift upward as providers quietly recover the lost subsidy in compute, storage and egress rates. Pricing teams at the big three have historically smoothed regional cost differentials, but the gap between subsidized and unsubsidized regions is becoming too large to absorb. Third, sovereign and European alternatives become marginally more attractive on a total cost basis. For European retail operators, that strengthens the case to keep core transactional workloads anchored in EU regions with stable, transparent fiscal regimes rather than chasing the cheapest US capacity for batch and analytics workloads.
The bigger structural question is whether the hyperscale industry can keep growing at the pace AI demand requires without a new social contract with the states and counties hosting it. The original bargain, that datacenters would bring jobs, has been thoroughly debunked: a 200 MW campus typically employs fewer than 100 permanent staff, and most of the construction labor is itinerant. Good Jobs First and similar groups are now arguing openly that the subsidies are functionally a transfer from local school districts and small businesses to the richest companies in the world.
DeWine has not signaled how long the pause will last, and his office has been careful to frame it as a review rather than a repeal. But the pause itself is the signal. We should assume other Republican governors in fiscally pressed states will follow, particularly where datacenter load growth is starting to push retail electricity prices higher for residential ratepayers. If that pattern holds, the cost of hyperscale expansion in the United States is about to reprice meaningfully, and the smart move for enterprise cloud customers is to lock in current rate cards on multi-year commitments before the next reset.
