Every new data center job in Virginia costs $54 million to create

Northern Virginia is, by every measure JLARC could find, the largest data center market on Earth — more than twice the size, in megawatts, of the next-largest market worldwide.▸ The industry got that big partly because Virginia exempts data center operators from sales tax on the servers, chillers, and generators they buy. That exemption was supposed to be a rounding error in the state budget. It is now one of the largest single line items in it, and the Commonwealth's own accounting shows the jobs it buys are getting more expensive, not cheaper, every year.

Every two years, the Virginia Department of Taxation, working with the state's economic development agency (VEDP), has to show its work: what the data center sales-tax exemption cost, and what it bought.▸ For the cohort of investment reported in Fiscal Year 2025, VEDP's own five-year return-on-incentive model draws the line like this — state and local tax revenue generated by the new investment and jobs, minus the value of the exemption itself, equals a net gain.

By this model the exemption "pays for itself" — a revenue-to-cost ratio of 1.6 and an 11% average annual return.▸ But the inputs are worth sitting with. The $1.94 billion exemption cost for FY2025 was up from $1.29 billion the year before — a 50% jump in a single year. And the report itself carries a disclaimer easy to miss: the jobs and investment figures underneath this whole model are "self-reported by data center operators" and "not independently validated by VEDP or the Department." The state is grading its own incentive using numbers the recipients of that incentive supplied.

VEDP's model counts revenue; it doesn't say much about what a job costs to create.▸ A separate analysis, run by the advocacy group Food & Water Watch using the same VEDP investment and employment filings, does — and the trend is the opposite of encouraging.

Across the full history of Virginia's exemption, back to 1990, the industry has generated one permanent job for every $13 million invested — against $137,000 to create a job anywhere else in the state's economy, roughly 100 times less capital per job.▸ Narrow the window to the current AI-driven building boom, 2020 through late 2025, and the ratio gets worse, not better: $54 million invested per permanent job, 168 times the cost of a typical Virginia job. Data centers are simply not a labor-intensive way to spend a tax break — they're built to run with a skeleton crew, and the newest, most automated generation of them runs with an even smaller one.

Net new jobs reported alongside that cost went from 1,197 in FY2024 to 1,610 in FY2025 — real growth, but nowhere near proportional.▸ The exemption grew 50%; the reported job count grew 35%. Every dollar of tax break is buying a little less labor than it did the year before, which is exactly the wrong direction for an incentive whose statutory justification is job creation.

All figures cover Virginia's state-level Retail Sales and Use Tax exemption for data centers (Va. Code § 58.1-609.3(18)); other states run comparable but separately administered programs not covered here.