Data center tax incentive legislation cited as way to make state more competitive

The Everett Herald editorial board has endorsed data center tax incentives.

For more than a decade, Washington state’s rural counties, and in particular Grant County in central Washington, have been able to to attract construction and maintenance of a fair number of data centers because of the state’s relatively inexpensive electrical power and land costs and also because of a tax incentive adopted by the state that has helped attract centers that otherwise might have gone to other states…

Legislation in Olympia, House Bill 2673 and Senate Bill 6307, which is sponsored by Sen. Guy Palumbo, D-Maltby, would extend the sales tax exemption now allowed for rural counties to the rest of the state. The result wouldn’t set rural and urban Washington against each other for data centers, but could help the state’s urban areas better compete with Oregon, in particular for a type of data center, called a “data mall,” that serves a number of customers that need such co-location centers closer to metro areas.

It’s not hard to imagine Snohomish County as a prime location for such data centers.

We wrote earlier of a Commerce Department report finding that Washington has fallen behind in data center competitiveness, in part because the tax incentives are limited to rural areas. The report says,

Three probable causes for Washington’s lagging growth are identified: (1) lack of aggressive promotion of the state’s data center economy and opportunities compared to other states; (2) historic confusion in the market about Washington’s data center incentives, which may no longer be that competitive; and (3) concession of the urban data market to Oregon because the Seattle market is not competitive on the basis of sales tax.

The Herald notes that the tax incentive legislation under consideration takes a “careful approach,” including limiting the number of centers and providing clawbacks.  The editorial concludes,

…providing a sales tax break could encourage the construction and operation of data centers throughout the state and continue to strengthen the state’s standing within an industry that provides thousands of family-wage jobs.

Makes sense to us.