Sunsets never seemed so…chaotic.

Virginia is 2 weeks away from a government shutdown over a budget fight.

Virginia is two weeks from a government shutdown over a data center tax break. The industry is paying to convince you it’s your problem. A red state with a Republican legislature just proved it doesn’t have to be.

If you live in Senator Louise Lucas’s or Senator Mamie Locke’s district, you may have received a text message this weekend. It tells you that politicians in the Virginia Senate are pushing “a new tax on digital infrastructure” that will raise costs on hardworking Virginians, and it asks you to tell your senators to “stop the digital tax.”

Read the fine print at the top of that text, and you find out who paid for it: the Northern Virginia Technology Council and the Virginia Chamber of Commerce. The tech industry’s own lobby is spending money to text voters, claiming that ending its tax break is a tax on them.

It is worth sitting with how brazen that is. So let’s go through what is actually happening, because almost every word of that text is doing work to hide it.

It’s not a new tax. It’s a sunset.

There is no new tax on the table in Richmond. What’s on the table is whether to let an existing tax break expire.

For over a decade, Virginia has handed data centers a sales-and-use tax exemption on their equipment, the servers and gear that fill those buildings. When it was first proposed, the exemption was projected to cost the state a small fraction of what it costs today. It now runs to roughly $1.6 billion a year in revenue that the state chooses not to collect, with the total annual value estimated to be even higher. That is not a rounding error in the Virginia budget. That is one of the largest corporate tax preferences in the Commonwealth, and it grows every time another data center opens.

And it is accelerating, not holding steady. From FY2015 through FY2024, Virginia granted data centers more than $2.7 billion in tax exemptions. Then in FY2025 alone, the state lost an estimated $1.6 billion, a 118 percent jump in a single year. Virginia forfeited more in that one year than in the previous ten combined. I traced how a break first pitched as a modest incentive ballooned into that, and what it’s already doing to your power bill, in What the Hell is a Gigawatt?.

So when the text says a “new tax,” it is describing the absence of a giveaway as if it were a penalty. Letting a subsidy expire is not a tax increase. If it were, every expiring tax break in American history would be a tax hike, and no subsidy could ever end.

This matters right now because of the calendar. Virginia’s budget has to be settled by June 30 or the government shuts down on July 1, something the Commonwealth has never actually done. The data center exemption is one of the pieces still in play. On Friday, the House released its budget. It kept the exemption whole. It created a commission to study the industry’s impact. And it stripped out the enforceable environmental standards the Senate had wanted attached. Governor Abigail Spanberger praised that approach as a way to honor the state’s commitments and protect ratepayers.

Senator Lucas wants the exemption scaled back, and she’s been touring the state making the case directly to voters. That is the actual fight: not a new tax, but whether a subsidy that has ballooned past anyone’s original estimate keeps running untouched while a commission studies it for another two years.

And she is not softening as the deadline closes in. At the start of the Senate Finance Committee meeting on the morning of June 16, Lucas said the Senate conferees had been working toward a compromise with the House and had listened to the governor, then drew the line in plain terms: she had found that the House and the governor “have focused their attention on protecting the data centers rather than being focused on what our citizens are asking us to do on this issue.” That is the Democratic chair of the Senate Finance Committee, on the record, accusing a Democratic House and a Democratic governor of carrying water for Amazon, Google, and Microsoft two weeks before a shutdown. This is not a fight someone outside the party is picking. It is coming from inside it.

And it has gotten loud, public, and personal in a way that mostly serves the people writing those text messages. The nicknames alone tell you how far it has slid. After a budget meeting fell apart in early June, Lucas went on X and christened Governor Spanberger “Data Center Diva” and Speaker Don Scott “Amazon Don,” warning the two of them that they were making a “monumental mistake.” In a televised interview, she put it more plainly: Spanberger is “a diva.” Scott answered with stiff diplomatic praise, calling Lucas “a trailblazer” and “a mentor,” and then, days later, accused her of sparking a “civil war” among Democrats. The Virginia Mercury’s headline on the whole standoff simply reads “Democratic unrest.”

And the dysfunction runs deeper than the name-calling. Negotiators who said they were “getting close” one week watched the talks blow up the next. Lucas floated a bare-bones “skinny budget,” one that funds only core services, as leverage, then turned around and opposed the idea once the House picked it up. Senate Majority Leader Scott Surovell warned that some colleagues would rather bring “DC-style continuing resolutions” to Richmond than make what he called the real choice, “between teachers and data centers,” something Virginia has never done in its history. Spanberger, for her part, insists she is the reasonable one, saying she has put forward proposals to make data centers “pay their fair share” for the energy they use. Meanwhile, administration officials have spent the week trading shots with online influencers in comment sections. Two weeks before a possible shutdown, a remarkable amount of energy is going into who called whom what.

Here is the thing to hold onto while the food fight plays out: the one fact not in dispute is that the $1.6 billion keeps flowing the entire time. The industry does not need to win the argument. It just needs the argument to never end. Every day Democrats spend fighting each other over process and personality is a day the exemption survives, the clock ticks toward June 30, and the path of least resistance, keep the break and study it later, gets a little more likely. Dysfunction is the status quo’s best friend, and right now the status quo is a giveaway.

Who pays, and who actually benefits

The text says the cost falls on “hardworking Virginians.” Let’s be precise about who benefits and who pays, because the industry has every reason to blur it.

The companies that bank this exemption are the largest in the world. Amazon, Google, and Microsoft are the names behind Virginia’s data center boom. The exemption comes off the cost of their equipment, which means it comes out of their profit margin. It does not change the cost of building or operating anything. It does not get passed to a single Virginia household at the checkout line. As the political analyst Bob Holsworth has put it bluntly, Virginia is handing billions a year to some of the wealthiest companies on the planet. The only line item the exemption touches is Big Tech’s bottom line. That is the whole reason they’re spending to protect it.

What about the jobs? This is where the industry’s pitch and the state’s own data part ways. Virginia’s Joint Legislative Audit and Review Commission, JLARC, studied the industry in 2024. It found data centers support around 74,000 jobs and contribute billions to the economy. But it also found that the overwhelming majority of that activity happens during construction. Once a data center is built and humming, it typically employs around 50 people. These are enormous, power-hungry buildings that, in steady state, run on a skeleton crew. The construction boom is real and temporary. The permanent footprint is small.

Now the part the text really doesn’t want you thinking about: power. And here I want to be more careful than the industry is, because the honest version is damning enough without exaggeration.

JLARC did not find that your electric bill is currently subsidizing data centers. It found the opposite, for now. The direct costs of the new generation and transmission these facilities require have so far been charged to the data centers themselves or to a customer class made up largely of data centers and other big users. There has been no crossover to ordinary households yet. But JLARC warned, in plain terms, that this could change as demand explodes, and that the protections keeping those costs off your bill are not guaranteed to hold.

And the indirect costs are already moving. Virginia’s data center demand is so large it is helping drive up capacity prices across the regional grid, PJM, where recent auctions hit record highs, and those increases flow into rates for customers across multiple states. On top of that, the utility serving most of these centers, Dominion, is building new fossil-fuel generation to meet the load, and that infrastructure lands in everyone’s rate base. So the accurate statement is this: the giveaway goes to Big Tech, the direct grid costs are held off your bill by protections the state itself calls fragile, and the indirect costs are already nudging your rates upward. “Stop the digital tax” inverts every part of that.

JLARC even put a number on the future it warned about: a typical Dominion customer could see generation and transmission costs climb by $14 to $37 more a month by 2040, in today’s dollars. And the present is already bending that way. Dominion’s latest approved rate increase adds roughly $16 a month to the average residential bill, and in one recent PJM capacity auction, PJM’s own independent market monitor estimated that data centers drove 63 percent of a $9.3 billion cost increase. I laid out the full bill-by-bill math back in February, in What the Hell is a Gigawatt?. The trajectory is the point: your bill is bending upward, and the exemption is what keeps Amazon, Google, and Microsoft from sharing the load.

The environmental switch nobody’s supposed to notice

Remember that Friday’s House budget didn’t just protect the exemption. It also cut the environmental standards the Senate wanted to attach to the industry’s growth. Hold that next to what the companies themselves are doing.

Microsoft, one of the biggest data center builders in Virginia, is reportedly weighing whether to walk back its signature pledge to run on 24/7 carbon-free energy by 2030, even as it expands here. Last fall it backed Dominion’s push for new gas plants. Dominion, after the data center surge, first called for several gigawatts of new gas generation and has since raised that number. Peer-reviewed research has found that data center demand on this scale could push the power sector’s emissions sharply higher than a path without them, in part by keeping coal running longer in Northern Virginia.

This is not a fringe concern. Virginia’s own Lieutenant Governor, Ghazala Hashmi, has called the data center build-out the single greatest threat to the Commonwealth’s clean-energy goals. When the second-highest official in the state and the companies’ own retreating climate pledges are both telling you the grid is getting dirtier to feed these buildings, stripping the environmental standards out of the budget is not a neutral act. It is a choice. (Environmental groups like the Sierra Club have made the sharper version of this argument, and they have an agenda; the Lieutenant Governor and the emissions modeling are harder to wave away.)

And none of this is hypothetical. I documented the full toll in February: the roughly 80 percent of cooling water that evaporates and never returns, the round-the-clock low-frequency hum from generators and cooling systems built next to homes, schools, and nursing homes, and the warning sitting one state over in Memphis. There, 33 methane gas turbines were fired up to power a single AI complex, smog jumped nearly 60 percent, and that one site now throws off more nitrogen oxides than the county’s chemical plant, refinery, power station, and airport combined. The neighborhood breathing it, Boxtown, is historically Black and already carries some of the highest asthma-related hospital visits in Tennessee. That is the version of this future that shows up when nobody attaches standards to the buildout. Friday’s budget just removed the standards.

The honest counterargument, because there is one

I’m not going to pretend this is simple, because it isn’t, and the people defending the exemption are not all acting in bad faith.

Data centers throw off real local tax revenue, and some localities have built their budgets around it. In Loudoun County, the data center hub, the industry contributes over $700 million a year, roughly 31 percent of the county’s budget. In Mecklenburg County, data center money has been used to build entire schools. Governor Spanberger has pointed to exactly that when defending a careful approach: unwind this too fast, and you blow holes in local budgets, invite lawsuits, and tell every company that Virginia doesn’t honor its deals. Those are legitimate concerns, and any serious reformer has to answer them rather than wish them away.

But notice what that argument actually justifies. It justifies a phase-down, a cap, a tiering of the exemption, and a real transition for dependent localities. It does not justify keeping a $1.6 billion giveaway completely intact and appointing a commission to think about it for two more years, two weeks before a shutdown deadline. “This is complicated” is an argument for reform with guardrails. It is not an argument for doing nothing and calling it prudence.

And Mecklenburg is the perfect illustration of the whole tangle. It’s the county Spanberger cites for schools built on data center money. It is also home to one of Microsoft’s largest Azure campuses, more than twenty buildings, the same company quietly backing away from its climate promises. Same county, both sides of this story. The revenue is real and the cost is real, and pretending only one of them exists is how you end up defending the status quo by accident.

Arizona just did the thing Virginia won’t

Here is the fact that should end the “it’s too hard” conversation.

Arizona, this year, enacted a first-in-the-nation three-year freeze on new data center tax breaks. No new entrants get the giveaway for three years while the state takes stock. Estimated savings: around $38 million a year. Governor Katie Hobbs had actually asked for a full repeal; the freeze is what the legislature delivered.

And here’s the kicker. Republicans control both chambers of the Arizona legislature. House Democrats fought the freeze into a bipartisan budget as a negotiated win, in a state where they don’t hold the gavel anywhere. They didn’t have a trifecta. They didn’t have the governorship and both chambers. They had a minority and a budget negotiation, and they still managed to stop the bleeding on new giveaways.

Virginia Democrats have all three. The governor’s mansion and both chambers of the General Assembly. And the plan on the table keeps the existing break whole and studies the question into 2027.

(To be precise, because precision is the point: Arizona froze new breaks, it did not repeal the existing ones, and its $38 million is the savings from pausing new entrants, a different and smaller measure than Virginia’s $1.6 billion existing exemption. The contrast isn’t in the dollar figures. It’s in the will. A red-state legislature found a way to act, and a blue-state trifecta is finding reasons not to.)

The tell isn’t the policy. It’s the panic.

Which brings us back to that text message.

If ending this exemption really would raise costs on ordinary Virginians, the industry wouldn’t need to lie about it. The facts would do the work. Instead, the Northern Virginia Technology Council and the Virginia Chamber of Commerce are paying to blast voters in two senators’ districts with a message that calls a corporate subsidy a tax on working families and begs them to “stop the digital tax.” They are spending money to manufacture the grassroots they don’t have, because the actual grassroots, the Virginians whose schools and rates and air are on the line, are not the ones benefiting here.

You don’t spend like that over a policy you’re winning on the merits. You spend like that when you’re scared. $1.6 billion a year buys a lot of text messages, and the people sending them are the people who keep the $1.6 billion.

And the texts are only the part you can see. As I noted in February, Richmond runs roughly three data center lobbyists for every single member of the General Assembly. The text-message campaign is just that same money turned outward, from working the legislators to working their constituents. When the inside game gets close, the industry brings it to your phone.

So here is the question facing Virginia’s Democratic trifecta over the next two weeks. A Republican legislature in Arizona managed to freeze new giveaways to the richest companies on earth. Will a Democratic governor and a Democratic General Assembly do as much, or will they keep the whole thing intact, strip the environmental guardrails, and let a commission run out the clock while Big Tech texts your neighbors that protecting its profits is protecting you?

It’s not a digital tax. It’s a sunset. And the only thing it threatens is a bottom line that can more than afford it.