The legislature prepares more well-being for companies. Senate Bill 157 by Sen. David Wheeler (R-22/Huron) would exempt large data centers from paying gross receipts tax on their hardware and software purchases if they relocate to South Dakota or expand their existing operations here. Wheeler argues that this tax break would incentivize big tech companies to build new server farms in the state, bringing jobs and money and blah blah blah.
SB 157 would apply only to data centers built or expanded after December 31, 2021, and only to purchases of computer equipment and programs beyond the first two million dollars of a company’s purchases in state in a given year. SB 157 exempts tax only if the purchased equipment is used or physically located in the qualifying data center. So it would appear that cloud software services could be eligible, as long as users are accessing that cloud software from endpoints in a data center in South Dakota. But SB 157 would not exempt computers and other equipment used by employees working from home, whether down the street on Phillips Avenue, remotely at the McMansion on Lake Madison or in San Francisco where company executives still live.
SB 157 includes a sunset clause: Wheeler apparently just wants to try this incentive for six years, until June 30, 2028, and see if we get any Big Data takers.
We insist on the term takers. SB 157 is just another recent South Dakota copy of the pro-corporate tricks other states have fallen for, giving huge tax breaks to wealthy corporations who don’t need it to get jobs. that do not produce a return on public investment. Forbes analyzes 15 data center projects in nine states that have received at least $811 million in tax abatements since 2015 and have created (or at least promised to create 837 permanent jobs). That’s $969,000 per job.
If this cost-to-job ratio holds for SB 157, the legislature could give South Dakota’s nearly 10,000 teachers a $1,000 raise for the same price it would take to create just ten more jobs at the centers. of data. We could hire 20 new teachers or 11 missing and murdered aboriginal investigators for the price of one data center employee.
The Senate initially balked at the award, narrowly defeating SB 157 on Feb. 14 on a 17-18 vote. But Wheeler asked the Senate to pick up his Valentine business off the floor Tuesday and reconsider. This time, the Senate approved SB 157 20–15. Wheeler actually lost Senators Stalzer and Maher, who voted Yeah Monday but No Tuesday, but he moved Senators Zikmund, Smith, Symens, Steinhauer and Novstrup from No for Yeah.
A tough No came from Sen. Jack Kolbeck (R-13/Sioux Falls), who spoke on Tuesday (video timestamp SDPB 29:12) to reiterate his opposition to more business subsidies. He cited the Forbes analysis quoted above as evidence that secret big data tax deals don’t produce huge job gains. He also noted that five data centers in South Dakota – one in Beresford, one in Yankton, three in Sioux Falls – have all paid their South Dakota taxes so far and do not need tax breaks to stay. He then read a statement “on the website of one of these companies”. Its text appears to be from the Tierpoint Sioux Falls–East Data Center website:
Sioux Falls is known for its jobs, low operating costs and high quality of life. South Dakota has no state, corporate, or personal income tax — and Sioux Falls has no city income tax. Many banks and financial firms choose South Dakota in response to the state’s favorable banking regulations. South Dakota is known for its retail, financial, and healthcare services, in addition to agriculture, meatpacking, mining, and ethanol production. Many companies choose data centers in the Midwest because the region has a low risk of earthquakes, hurricanes, and wildfires [Tierpoint, “Sioux Falls – East Data Center,” retrieved 2022.02.17].
Senator Kolbeck added the phrase “and has a favorable time” at the end of this quote; Tierpoint does not mention favorable weather conditions, beyond the low risk of hurricanes, on its Sioux Falls East or Sioux Falls West data center pages. Hurricane concerns don’t stop Tierpoint from operating data centers in Florida, North Carolina, Maryland, Massachusetts, Texas and Arkansas:
But weather or not, Senator Kolbeck’s main point is that South Dakota already offers enough advantages — tax, economic, seismic, and weather — to bring Big Data jobs to our state. In addition to what Senator Kolbeck mentioned, we already have $30 million down the chute (Senate Bill 54) to expand Dakota State cyber training to Sioux Falls, $50 million ( Senate Bill 55) to expand broadband infrastructure and large amounts of Biden dollars coming in to flesh out our IT infrastructure. The last thing we need is more business grants to create a handful of jobs that are already coming to South Dakota.
Senate Bill 157 then heads to the House of Commerce and Energy.