As a way to bolster a growing IT industry, Gov. Gary Herbert signed a new package of tax incentives on Monday designed to convince companies like Facebook and Google to build data centers in Utah.
SB3002 allows firms building data centers in the state to purchase equipment tax-free, provided that certain criteria are met. Evelyn Everton, the director of Americans for Prosperity-Utah, said that tax cuts should have been made across the board.
“Any time when we, instead of creating a level playing field and creating tax breaks for all businesses, offer these incentives to a few companies, it’s hard not to argue that it is the government picking winners and losers,” Everton said. “If we’re really concerned with being a competitive state then let’s create those tax incentives for every business in the state of Utah.”
Other states also have programs designed to lure data centers. Most give huge tax breaks while requiring that data centers come with a large capital investment of tens or hundreds of millions of dollars and a minimum number of jobs created. Companies then pay little or no tax on infrastructure, power, or equipment. Everton said that this encourage all-too-cozy relationships between government and business.
“These kinds of policies ultimately do hurt our economy in the long run. It tells companies that instead of building value and creating value for consumers that you should invest money in lobbying efforts, so that when these kinds of incentives are getting doled out, you’re first in line,” she said.
There is a debate about the value of data centers. While these facilities typically bring fewer than 100 jobs, they could boost tax revenue, being so capital-intensive. According to Everton, tax incentives for only a few companies is not what a free market system is all about.
“’Free market’ is a word that gets thrown around a lot but, certainly, providing tax incentives is really the antithesis of a free market system. We’re certainly not giving tax incentives to all the start-ups that are being started here by Utahns,” she said. “The conversation needs to be had: is this the best way to incentivize businesses? Shouldn’t we be looking at creating an even playing field? Do we really believe that the free market works?”
Salt Lake City is one of several metropolitan areas such as Atlanta, Dallas, and Portland, where leasing data centers is relatively inexpensive.
