Virginia Gov. Abigail Spanberger (D-VA) defended the economic and national security importance of the state’s booming data center industry this week, days after approving a budget that imposes Virginia’s first tax on the sector’s electricity consumption.
Spanberger said the new budget strikes a balance between ensuring data centers “pay their fair share” while preserving an industry she said is critical to Virginia’s economy and the nation’s technological leadership in an interview with Politico.
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“There’s a national security implication, and we as a nation don’t want to cede that ground,” Spanberger said. “Walking away from a technology that is going to continue to proliferate is walking away from the table.”
The budget, finalized by lawmakers at the end of June after a monthslong impasse, creates a first-of-its-kind tax on the electricity consumed by data centers, the state’s most energy-intensive industry. The tax is expected to raise up to $600 million annually, or $1.2 billion over the two-year budget. Revenue collected above that cap will be refunded to data center operators at the end of each fiscal year.
The measure comes as Virginia grapples with the industry’s explosive growth. According to a 2024 report by the Joint Legislative Audit and Review Commission, data centers used roughly 5,050 megawatts of electricity that year based on utility forecasts. By the end of 2025, Dominion Energy reported it had received requests for 70,000 megawatts of new large-load electricity service, underscoring mounting pressure on the state’s power grid.
The new tax represents a relatively modest change compared to the industry’s existing incentives. Virginia’s sales and use tax exemption for qualifying data centers is estimated to save operators about $1.9 billion annually, which is far more than the projected revenue from the new electricity tax. The budget also establishes a work group to study whether the exemption should eventually be phased out or replaced with other mechanisms requiring data centers to contribute more.
Spanberger said eliminating the tax exemption outright would risk damaging an industry that has become a cornerstone of Virginia’s economy.
“My approach to this was you have to always look at — what are we trying to achieve?” she said. “Are we trying to say we don’t want data centers in Virginia anymore?”
She pointed to communities where data centers account for roughly half of local tax revenue through property taxes and other payments, helping fund schools, libraries, and fire departments while reducing pressure on homeowners’ property taxes.
“The affordability side means that local property tax is not going up,” Spanberger said. “Local community members are not bearing that direct brunt.”
Instead, she argued, taxing electricity consumption better aligns with lawmakers’ goal of requiring the industry to contribute more without discouraging future investment.
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Spanberger also warned that abruptly ending Virginia’s incentives would threaten construction, electrical, and union jobs while hurting rural communities that have embraced data center development.
“This is where Virginia, through the General Assembly and through work in my administration, can set the highest standard and frankly lead the nation — and arguably the world — in the type of innovation,” she said.
