How Data Centers Are Reshaping Virginia's Local Economies and Tax Policies

Two reports published in May examined the economic impact of data centres on local communities. They highlighted benefits such as property tax revenue, business investment, and development-friendly tax policies. The findings were discussed by industry experts and policymakers in Virginia, where data centres play a major role in local finances. Virginia currently offers a sales and use tax exemption for qualifying data centre equipment. To be eligible, projects must invest at least $150 million and create 50 jobs with wages set at 150% or more of the local average. Debbie Jennings, Senior Policy Manager at National Taxpayers Union Foundation, explained that these exemptions apply to business inputs, much like those for manufacturers and other industries, rather than consumer goods.

Pete Sepp, President of the National Taxpayers Union, presented the reports and stressed how data centres underpin the digital economy. In Loudoun County, data centres contribute 38% of the General Fund revenue and nearly half of all property tax income, yet they occupy only 4% of commercial land. The county has seen tax rates drop over the past decade, with the real property tax rate falling from $1.145 in 2016 to $0.805 in 2025, partly due to this revenue stream.

Matthew Putnam, Policy Manager at the National Taxpayers Union Foundation, pointed out that the long-term advantage lies in the local tax revenue generated by data centres. This money can fund public services without the need for significant population growth. Speakers also noted that data centres can attract additional private investment and support infrastructure upgrades.

The state’s conference budget keeps the existing sales and use tax exemption but introduces a new electricity consumption tax for data centre operators. The discussion highlighted the need for policymakers to balance these economic benefits against concerns like electricity demand, water use, and land allocation. The reports and subsequent debate underline the financial contributions of data centres to local economies. Loudoun County’s reduced tax rates and substantial revenue from the sector demonstrate their impact. The new electricity consumption tax reflects ongoing efforts to manage the trade-offs of data centre growth.