Hi, this is Rob Bloxom with this week’s Capitol Report.
The 60-day session is over. The most important task of the General Assembly is not complete, the adoption of the biennial budget. We will be called back into special session to complete this task when the Senate and the House agree on the amount of revenue we have to spend.
The disagreement centers on the data center sales and use tax exemption, which in the Code of Virginia runs through 2035. This exemption was put in place to attract this new industry to Virginia. That incentive helped Virginia become the data center capital of the world. The benefits to Virginia, and especially to localities, are significant. In fact, the local tax revenue allows one county in Northern Virginia to lower its personal property tax by 30 cents on the dollar. To give you some reference for the biennium, Virginia gave a two-billion-dollar incentive in the form of sales and use tax exemption, but received eighty-one billion dollars in capital investment, over 3000 new jobs, and the locality benefited with four billion dollars in local taxes.
Opponents argue that data centers increase electricity costs and strain water resources, although water usage has been reduced through new cooling technology. Others point to the large buildings and the constant hum of cooling systems. I find it ironic that many of these same critics rely on smartphones and cloud storage, services that depend on these very facilities.
It is also important to remember that many parts of Virginia would welcome data centers. The tax revenue could help fund schools and reduce reliance on the two primary local revenue sources: the car tax and personal property tax.
It is also worth noting that Democrats control both the House and Senate, as well as the Governor’s Mansion. At the same time, the Virginia Clean Economy Act is pushing the Commonwealth toward 100 percent clean energy, which is contributing to higher electricity costs. We need reliable base load generation alongside clean energy, rather than importing electricity from neighboring states that often produce power with higher emissions.
I fully support the House position. These companies made long-term commitments to Virginia, and now we are changing the rules in the middle of the game. That is damaging to our reputation in the business community. Companies have invested billions of dollars based on the understanding of these policies. Thanks to Governor Youngkin and the incentives put in place over the years, we have multiple businesses under contract to locate in Virginia. Reversing course now is akin to pouring ice water on hot coals. I am concerned that this shift, along with other business-unfriendly legislation currently on the Governor’s desk, will drive investment to competing states.
Another issue with not having a budget on time is that our localities rely on state funding to finalize their own budgets. This delay creates a ripple effect that worsens the longer the stalemate continues. This is not a revenue problem; it is a spending problem. Governor Youngkin left the new administration with a $1.9 billion surplus. The House Appropriations Committee stayed within its means. The Senate, however, spent $2 billion more and now seeks additional revenue from an industry that has fallen out of favor with some local opposition.
In the coming weeks, I will highlight additional topics and discuss legislation considered this session, including those bills now on the Governor’s desk. She has until April 13 to veto, amend, or sign them into law.
As always, you can contact me at my district office at 757-824-3456 or by email at delrbloxom@house.virginia.gov.
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Personal Property Tax needs to be abolished. Taxing to own ! Isn’t that part of the reason we left Britain. Its not in NY and never will be.