West Virginia Proposes Plan to Eliminate State Income Tax Through Data Center Revenue

<p>West Virginia leaders are advancing discussions regarding data centers, with Governor Patrick Morrisey presenting a seven-point plan aimed at reducing and eventually eliminating the state income tax while addressing concerns related to natural resources and infrastructure. </p><p>The proposal arises as data centers gain attention nationwide, with states seeking to attract substantial investments and job creation, while communities express concerns about utility costs, water usage, and local governance. The demand for electricity from large facilities supporting the artificial intelligence sector is also increasing, placing additional strain on power grids across the country.</p><p>According to the plan, West Virginia would allocate 50% of the revenue generated from approved hyperscale data center projects to the reduction and eventual elimination of the state personal income tax, with the remaining revenue directed towards counties and infrastructure projects.</p><p>“Today, as the world stands on the cusp of a new digital and economic frontier, West Virginia is stepping forward once again to lead, not by repeating the mistakes of other states, but by implementing a proactive, 20-year development strategy on our terms,” Morrisey stated in a press release.</p><p>The second principle in Morrisey’s plan emphasizes that all West Virginians should benefit from data center projects approved through Charleston’s High Impact Data Center Designation (HIDC) process, established under a separate 2025 state law.</p><p>The plan includes provisions for direct tax relief for citizens, ensuring that none of the HIDC revenue enters the state general fund.</p><p>“By law, 50 percent of project revenue is dedicated directly to reducing and ultimately eliminating the State Personal Income Tax,” the plan states.</p><p>Counties hosting data centers would receive 30% of the revenue for local schools and government, while 10% would be distributed to all 55 counties, and another 10% would fund infrastructure improvements, including public water systems. Water infrastructure has become a significant issue in parts of southern West Virginia, which have faced challenges since the decline of the coal industry.</p><p>“This shared framework gives us the exact blueprint we need to attract billions in private investment, create thousands of high-paying construction and technology jobs, lower taxes for our citizens, and revitalize economically distressed regions, all while preserving the wild and wonderful state we call home,” Morrisey added.</p><p>However, some West Virginians are expressing concerns about the potential costs associated with the state’s data center expansion.</p><p>The bipartisan bill supporting the governor’s plan also aims to protect utility customers from additional costs, a significant concern in the Eastern Panhandle, which borders the Washington, D.C. metro area.</p><p>“No Data Centers” signs are increasingly visible along roads in Jefferson and Berkeley counties and neighboring Clarke County, Virginia, as residents reference nearby Loudoun County, Virginia, where extensive data center development has encroached on residential areas and commercial centers.</p><p>“We are a cautionary tale for the rest of the country,” stated Rep. Suhas Subramanyam, D-Va., in recent remarks critical of the data center expansion. “[I]f my district were a country, it would have more data centers than almost every other country in the world.”</p><p>In West Virginia, some state lawmakers are advocating for additional safeguards as data center development accelerates.</p><p>West Virginia House Minority Leader Sean Hornbuckle, D-Huntington, who sponsored the 2025 bill that initiated the plan, recently suggested amending the law to allow for some local control over data center development.</p><p>“We are not going to allow a hostile takeover in our communities. It’s not going to happen on our watch,” Hornbuckle stated in June, according to the Steubenville Herald-Star.</p><p>“We all know what House Bill 2014 did, and it’s setting a very dangerous precedent in the state of West Virginia, [where] we all know we love our property rights,” he added.</p><p>Morrisey emphasized in comments that “all West Virginians must directly benefit from data center revenue.”</p><p>“By statute, 50% of the proceeds … will be dedicated to directly reducing and ultimately eliminating the state income tax,” he said. “[It’s] very powerful [and] it’s going to benefit many, many West Virginians.”</p><p>West Virginia income taxes have already been decreasing. Senator Jim Justice, R-W.V., signed a record 21% cut while serving as governor, followed by another 5% reduction this year. The top marginal rate currently stands at 4.58%.</p><p>A spokesperson for West Virginia House Speaker Roger Hanshaw noted that the plan originated from the governor’s office but aligns with the legislature's enactments in the 2025 law.</p><p>Hanshaw has previously supported data center development in West Virginia, stating that Charleston is “not only working with industrial partners as friends and allies to grow and diversify an economy, but also to regulate appropriately industries that are important to the communities in which they're situated to the people of West Virginia and to the residents that we all collectively represent.”</p><p>Morrisey’s plan also emphasizes power grid reliability, requiring data center developers to collaborate with PJM and other interstate grid operators. The plan positions data centers in West Virginia as strategic infrastructure with national security implications in the context of competition with China.</p>