How The Tax Break for Data Centers Was Passed

Rendering of data center campus in Port Washington. Rendering from the City of Port Washington

On June 22, 2023, legislators and lobbyists waited anxiously to see what would be in — and out — of the final amendment offered by co-chairs of the Joint Finance Committee to the $99 billion, 2023-25 state budget.

Finally, after backroom discussions with legislative leaders and other power brokers, Motion 126 was introduced by the Republicans who led the committee, Sen. Howard Marklein and Rep. Mark Born.

It was a six-page, 14-item summary of final spending recommendations the Legislature’s budget committee made to the Assembly and Senate. Controlled by Republicans, the Legislature made only minor changes before passing the committee’s budget, which Democratic Gov. Tony Evers signed days later.

The committee vote on Motion 126 was a predictable 12-6. Republicans, yes; Democrats, no.

Motion 126 included $120 million for private schools over two years, $25 million for investment programs and $20 million for oral health care, and resolved minor issues involving the Department of Natural Resources and Office of the Insurance Commissioner.

But Item 12 in the committee’s amendment has become a controversial issue in the Nov. 3 election for governor and members of the Legislature. It gave an exemption from sales and use taxes for the construction of data centers certified by the Wisconsin Economic Development Corp. and the electricity those data centers use.

A bill (AB 302) to enact the sales tax exemption for data centers, sponsored by 12 Republicans, passed the Assembly on a 60-34 vote one day before the Finance Committee amendment. The bill’s Assembly sponsors included Shannon Zimmerman, a Finance Committee member.

Although an identical bill was pending in the Senate, it had not received a public hearing, committee vote or Senate vote. To become a law, both houses of the Legislature must pass identical bills.

The Finance Committee’s approval was not surprising, however, given lobbying efforts to pass the tax break. Ethics Commission records show 15 organizations — utility companies, Microsoft and the Wisconsin Technology Council — hired 59 lobbyists to push for the exemption. Those lobbyists included two former Republican Assembly speakers, Jeff Fitzgerald and John Gard, and former Senate Democratic Leader Jennifer Shilling.

In 2023, there was no way to estimate what the tax break would cost in the future: “The estimated amount of foregone sales tax revenue as a result of this provision is unknown,” reads page 331 of the summary of the Legislature’s 2023-2025 budget.

Now, pre-election calls to cancel the data center sales tax exemption for giant companies like Amazon, Microsoft, Google and Meta are coming from candidates of both parties, since one estimate is that the companies could spend almost $40 billion building Wisconsin centers by 2028. The opposition includes Republicans, whose party passed it in 2023.

The Republican candidate for governor, Congressman Tom Tiffany, says the tax break should be repealed. The Democratic candidate for governor, Milwaukee County Executive David Crowley, recently said he would sign a bill ending it.

In their Oct. 21 debate, Tiffany noted that Crowley had only come to that position “last week.”

Isthmus columnist Dave Cieslewicz recently noted how both have reversed previous support for data centers.

“In December of last year, Tiffany voted for a U.S. House bill that would speed up federal permitting processes for the centers, and he referred to them as ‘an exciting new technology,’” Cieslewicz said. “At almost the same time, in November 2025, Crowley crowed that Wisconsin could be ‘a data center hub, not only for the entire country, but for the entire globe.’”

There are two reasons for candidates’ election-year calls to repeal the sales tax exemption.

First, there is now an estimate of what it could cost the state in lost revenues. In a March memo, the Legislative Fiscal Bureau (LFB) projected that, if four data centers cost $36.9 billion to construct between 2024 and 2028, state government could lose $1.5 billion in sales taxes.

The annual loss in sales tax revenue could be an additional $369 million, since electricity used by the centers is also tax-exempt, LFB added.

Second, opposition to data centers from Wisconsin residents has grown. The latest Marquette University Law School poll found that 74% of those surveyed said the costs of centers outweighed the economic benefits, while 24% disagreed.

It wasn’t the first time sponsors of a major policy change used a parliamentary back door to get a major policy change approved. And It won’t be the last.

Steven Walters started covering the Capitol in 1988. Contact him at stevenscotwalters@gmail.com