OPINION:
Virginia is home to the nation’s third-largest technology industry workforce, with 330,000 people working in the sector or in tech occupations.
The commonwealth’s emergence at the center of the digital economy did not happen by accident. It is the outcome of decades of smart policies and investments that helped make Virginia an early hub for information technology, from the birth of early internet trailblazers such as AOL in 1985 to the pioneering build-out of fiber-optic networks in the 1990s.
Building on that momentum, state leaders made a forward-looking decision nearly two decades ago to use tax incentives to attract a promising but still emerging industry: data centers.
What began as a modest economic development tool has grown into one of Virginia’s most significant competitive advantages. Data centers now support 74,000 jobs, $5.5 billion in labor income and $9.1 billion in gross domestic product across the commonwealth annually.
Looking ahead, leadership in this technology positions Virginia to benefit greatly from the rise of artificial intelligence and other emerging technologies, which depend on the very digital infrastructure that data centers provide.
The foundation of Virginia’s technology success rests on thousands of small businesses, including software startups, cybersecurity firms, engineering companies, electricians, data center contractors and the innovation ecosystem that supports Virginia’s technology leadership.
That is why proposed efforts in Richmond to roll back Virginia’s long-standing sales and use tax exemption for data centers would be a grave mistake.
However it is framed, the practical effect would reach far beyond one industry. A tax on digital infrastructure is a tax on everyone, including working families, local governments and small businesses in every corner of Virginia.
Data centers generate substantial local tax revenue, particularly through real estate and business personal property taxes. Virginia’s legislative watchdog found that in counties with mature data center markets, data center revenue can account for as much as 31% of total local revenue.
In Loudoun County, data centers generate almost half of all county property tax revenue and return $26 in tax revenue for every $1 in county services they require. In Prince William County, data centers generated $293.7 million in tax revenue in tax year 2024 alone, a 77% increase over the prior year.
Those funds help these local communities fund schools, public safety and essential services while reducing pressure on residents to shoulder a larger share of the tax burden.
If Virginia’s elected leaders force investment and the associated tax base to look elsewhere, then local governments may need to scale back these services and place greater tax burdens on existing residents and businesses. Moreover, business leaders and investors will likely look to other states to bring their capital and jobs.
Changing the rules midstream also raises more concerns for Virginia’s eroding business climate. Within one year, the state of Virginia fell from No. 1 on CNBC’s Top States for Business to No. 4. Many pro-business states continue to cut taxes and modernize regulations, while Virginia’s current inclination is to raise taxes and impose more mandates.
Virginia now ranks 30th on the Tax Foundation’s 2026 State Tax Competitiveness Index, and there is little talk in Richmond of tax relief, a major pain point for the state’s small businesses.
If the state invites an industry to invest billions of dollars under one set of rules and expectations, then abruptly changes course after that investment arrives, business leaders in every sector will take notice. Certainty and trust matter. Long-term investment depends on both.
Thankfully, Virginia House Speaker Don Scott agrees with this principle. According to WVTF Radio, he recently told business leaders: “We need to make sure that we do not do anything to kill the golden goose. I really don’t care about a specific industry. I care about keeping our word to businesses that we attract and that we want to retain in the commonwealth of Virginia. That’s what I care about.”
Supporters of repeal argue that Virginia can simply collect more revenue from an industry that is already here, but that assumes investors have no alternatives. They do.
Again, other states are aggressively competing for business relocation and expansion projects, including data center investments. Virginia’s advantage has been built over time through infrastructure, talent and policy stability.
Undermining one of those pillars sends a damaging message to every company considering a major investment in Virginia.
Gov. Abigail Spanberger and lawmakers in both chambers of the General Assembly need to keep the commonwealth focused on growth and competitiveness. Competition among the states is only intensifying. That means rejecting proposals that raise taxes on Virginia’s residents and businesses.
Elected officials must maintain a stable environment for business and work to strengthen it.
• Karen Kerrigan is president and CEO of the Small Business and Entrepreneurship Council and a resident of Virginia.
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