Illinois governor proposes cancelling tax breaks for datacenters

The Illinois governor JB Pritzker proposed a two-year break from offering tax incentives for datacenters, a reflection of increasing public pushback against the massive, resource-hungry facilities used to power the modern AI boom.

Pritzker made the proposal, which will need the backing of state lawmakers, during his annual state of the state address, which covers Illinois budget and policy plans. The plan was first reported by NBC News.

“In the face of rising demand and surging prices, I’m proposing a two-year pause on authorization of new datacenter tax credits,” Pritzker said. “With the shifting energy landscape, it is imperative that our growth does not undermine affordability and stability for our families.”

Concern over how datacenters affect nearby residents and drain resources has become a growing political issue around the world, as companies frequently invest huge sums into building sprawling facilities against the wishes of local communities. Several big tech firms such as Microsoft and Anthropic have claimed that they will cover rising power costs related to demands from their datacenters, amid bipartisan pressure before midterm elections later this year.

In addition to calling for a suspension of tax incentives, Pritzker also demanded that northern Illinois power grid operator PJM mandate that datacenter developers assume the additional costs of their power demands.

“PJM must force datacenter developers to pay for capacity resources to power their operations to protect consumers from higher rates,” Pritzker said.

Much of Pritzker’s speech, and especially its mention of datacenters, focused on the theme of affordability – a central political narrative this year amid rising cost of living in the US and a major focus of Donald Trump in 2024 before his election. As both Democrats and Republicans make claims to bring affordability, datacenters and their developers have increasingly come under fire. Trump’s trade adviser Peter Navarro earlier this week said that the administration could force datacenter builders such as Meta to internalize the electricity costs, though he provided no explanation of how that would work.

Illinois has been one of the earlier and more active states in pursuing legislation and policymaking surrounding the AI boom. In 2024, Pritzker signed a series of bills related to AI replicas and artists’ rights, employment discrimination and the use of deepfakes for child sexual abuse material. State lawmakers and Pritzker also vowed to oppose Donald Trump’s executive order last year that aimed to prevent states from creating their own regulations on AI. The state has also enacted more stringent biometric privacy laws than the rest of the US.

Several other states, including Georgia and Oklahoma, have proposed moratoriums on building new datacenters until more assessments can be done on potential regulation. The bill proposed in Georgia would stop new datacenters until March of next year, a significant pause in an industry dominated by a desire for rapid advancement and unfettered growth.