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 developed with lawmakers aimed at reducing and ultimately eliminating the state income tax while addressing concerns related to natural resources and infrastructure.</p><p>The plan emerges as data centers are gaining attention nationwide, with states seeking to benefit from significant investments and job creation, while communities express concerns about utility costs, water usage, and local governance. The large facilities required to support the artificial intelligence sector are also increasing electricity demand, exerting pressure on power grids across the country.</p><p>According to the plan, West Virginia would allocate 50% of revenue generated from approved hyperscale data center projects to the reduction and eventual elimination of the state personal income tax, while directing some of the remaining revenue to 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 indicates that all West Virginians should benefit from data center projects approved through Charleston’s "High Impact Data Center Designation (HIDC)" process, which was established under a separate 2025 state law.</p><p>Morrisey’s plan includes "direct tax relief for citizens," with none of the HIDC revenue entering 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 schools and local government, while 10% would be distributed to all 55 counties and another 10% would fund infrastructure upgrades, including public water systems. Water infrastructure has become a significant issue in parts of southern West Virginia that have faced challenges since the decline of the coal industry.</p><p>"This shared framework provides us with the blueprint needed 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 state we call home," Morrisey said.</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 aimed to protect utility customers from increased costs — a major concern in the Eastern Panhandle, which borders the Washington, D.C. metro area.</p><p>"No Data Centers" signs are becoming prevalent along roads in Jefferson and Berkeley counties and neighboring Clarke County, Virginia, as residents highlight issues in nearby Loudoun County, Virginia, where extensive data center development has encroached upon residential areas and commercial centers.</p><p>"We are a cautionary tale for the rest of the country," said Rep. Suhas Subramanyam, D-Va., of Ashburn, in recent remarks critical of the data center expansion. "If 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 progresses.</p><p>West Virginia House Minority Leader Sean Hornbuckle, D-Huntington, who was a sponsor of the 2025 bill that initiated the plan, recently stated that the law should be amended 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 said 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 value our property rights," he added.</p><p>However, 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 stated.</p><p>West Virginia income taxes have already been decreasing. Senator Jim Justice, R-W.V., enacted a record 21% cut while serving as governor, and Morrisey followed with an additional 5% reduction this year. The top marginal rate currently stands at 4.58%.</p><p>A spokesperson for West Virginia House Speaker Roger Hanshaw indicated that the plan originated from the governor’s office but aligns with what the legislature enacted in the 2025 law.</p><p>Hanshaw has supported data center development in West Virginia, previously 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>