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Texas Moves to Rework Data-Center Tax Break After Cost Rises to $3.3 Billion

Bipartisan hearings, protests, regulator directives target oversight gaps, local impacts, a projected $3.3 billion tax loss.

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The pressure is on Governor Greg Abbott as data center opponents push for a special legislative session on the massive artificial intelligence sites. A recent poll by UT's Texas Politics Project showed 56% of Texans oppose building data centers in their communities. Grassroots organizers said it is time to turn up the volume on their demands for Governor Abbott to “press pause on data centers. (Photo: CBS Austin)
People gather on the South Steps of the Texas Capitol to protest data center expansion before a Texas Senate Committee on Finance hearing in Austin, Monday, July 27, 2026.
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Overview

  • The Texas Senate Finance Committee, which met Monday, heard the Comptroller update a projection that the sales-tax exemption for qualifying data centers will cost about $3.3 billion in the 2028–29 biennium.
  • Audits required five years after certification have lagged and of roughly 20 completed reviews six projects were found noncompliant, raising questions about self-certification and repayment enforcement.
  • Grassroots groups and rural residents launched a ‘Week of Action’ at the Capitol calling for a moratorium or a special legislative session to address heavy water use, noise and strain on local electric grids.
  • Governor Greg Abbott has directed the PUC and ERCOT to require developers to pay for grid upgrades, bring their own power and reuse water, and key legislators say they will file bills to reform or repeal the exemption in the January 2027 session.
  • Industry groups argue the exemption spurred investment, jobs and GDP growth in Texas while opponents counter that fast expansion shifted infrastructure and environmental costs to local communities and other taxpayers.