Taxes, Data Centers, and Republican Party Politics

Corey Stewart

Data centers account for 92% of all new capital investment in Prince William County between 2012 and 2017. Now Corey Stewart, chairman of the Board of Supervisors and Republican candidate for the U.S. Senate, wants to raise taxes on them.

Stewart, who is running as a Donald Trump-style populist, proposes to use the $21 million in additional taxes to slash the county’s real estate tax rate. It’s about time, he says, that data centers pay their fair share of taxes, reports Inside Nova.

“The big data center companies in Prince William County are some of the largest, wealthiest corporations in the world,” Stewart said. “And I think people are concerned about data centers because these are big, ugly buildings that employ very few people, push up the cost of commercial land and drive the need for even more transmission lines in the county. We’re giving them a tax break, and that’s not right.”

Data centers used for cloud storage constitute one of the biggest bright spots in Virginia’s economic development efforts as the state struggles to diversify its economy from overreliance on the federal government. Loudoun and Prince William Counties have benefited from their proximity to the surfeit of high-capacity fiber-optic cable in Northern Virginia to attract billions of dollars in data-center investment. Other localities such as Virginia Beach and Henrico County have begun competing for the business by reducing tax rates on computers and peripherals. Even with the lower rates, data centers yield enough in local tax revenues that localities regard them as huge positives for the tax base.

In Prince William, the electricity-hungry data centers have become embroiled in a related issue of how to supply them with electric power. In a bitterly contested case, Dominion Energy has been trying to get approval to build a transmissions line through western Prince William County not only to serve a growing population but to deliver power to an Amazon Web Service data center in the Haymarket area.

According to Inside NoVa, Stewart argues that a higher tax won’t make existing data centers leave. The owners have already spent so much money to build the facilities and install the servers and other equipment that they would not shut them down.

Needless to say, the Northern Virginia Technology Council (NVTC) and its business allies oppose the tax, noting that raising the tariff will discourage future investment by cloud providers. Josh Levi, NVTC’s vice president for policy, says that some data centers fall into the category of “colocation centers” where the owner rents out server space to smaller businesses. If Prince William raised its tax rate, these colocation centers would have to pass on the new cost to their customers and potentially scare away some away. “It’s about dollars and cents, not emotions, for these companies,” Levi said.

Stewart responds that even with the tax increase, Prince William’s computer equipment rate still would be lower than that of Loudoun County, which has seen no diminution of interest by data centers. Cloud providers, he says, are still “pounding on their door.”

It will be interesting to see how Stewart’s tax-hike proposal plays out in the Republican senatorial nominating contest. Traditionally, Republicans could be counted on to take a pro-business, anti-tax stance. But Stewart is inveighing against a group of companies that are taking a beating in the public perception, especially among political conservatives.

Facebook has been roundly criticized from the left for being insufficiently vigilant in protecting the privacy of its users from misuse by Cambridge Analytica, an English data mining company affiliated with conservative figures and the Trump campaign. But conservatives have retorted that Facebook shared far more user data with the Obama campaign. A populist wave building within conservative media contends that Facebook, Google, Twitter and other West Coast tech giants, increasingly politically correct, are suppressing conservative voices on social media. Likewise, President Trump has singled out Amazon for allegedly not paying its fair share of sales taxes. If the revolt against the tech giants continues to build, then Stewart’s tax gambit could play very well in the Republican base.

Bacon’s bottom line: The Democratic Party and the Republican Party both represent coalitions of diverse groups and interests. Increasingly, the Democrats appear to be divided between the leftist “Bernie bro” faction and the establishment Hillary faction. Similarly, Republicans are divided between a populist Trump-loving faction and an establishment faction repelled by Trump’s careless, populist rhetoric.

Those divides are reflected in Virginia politics. Virginia Democrats faced a choice between the establishment candidate Ralph Northam and the Bernie-bro candidate, Tom Perriello in the nomination for governor last year. Having won both the nomination and the election, Northam appears to be in a position to keep the party unified… at least for now. While Republicans also selected an establishment candidate to run for governor, Ed Gillespie, he lost handily, creating a big opening for a Trump-style populist like Stewart. While I question his policy proposal to increase taxes on data centers, I suspect that Stewart’s gambit might be good politics — good enough, at least, to win the nomination.

As the dominant political parties schism, I can’t help but think there is an opportunity for a fiscally conservative, market-oriented, socially moderate and racially/ethnically inclusive party like the Libertarians. Libertarians have yet to identify a demographic constituency upon which to build a political base. But if they find just one leader who can crack that nut, politics in Virginia and the nation are ready to crystallize into a very different form.

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23 responses to “Taxes, Data Centers, and Republican Party Politics

  1. I wish I could agree with your bottom line, Jim. If there were a viable third party such as you describe in existence now, people would flock to it. But the institutional inertia and organizational forces embedded in our two party system make it a stupendous, perhaps an insurmountable, obstacle to get a third party off the ground and past the point where a vote for it is a vote “wasted.” This Trump character is so scary, so over-the-top, so corrupt, that we don’t have the luxury of a slow ramp-up of a third party organization in 2020 for a serious run in 2024. Only the Dems can hobble him, through Congress, and that in 2018, and they will, with a lot of peripheral damage to conservative causes that matter but they will have achieved the one thing that matters most, constraining this crass and narcissist Queens real estate broker and reality TV host as he represents our nation on the world stage. The Repubs have lost their credibility on that score.

    Personally, it seems unlikely to me that Corey Stewart could do better than Gillespie, but we will see. Taxing those data centers specifically is a loser.

  2. Reminds me of the 1920s when Germans, Italians, Spanish, Russians etc. went populist and elected Lenin, Hitler, Franko and that crazy guy from Italy. The average guy on the street very upset with his or her situation wanted someone to turn things upside down and America is following that same path with Trump, Bernie etc.
    Things are changing and who knows for sure how we will end up.

  3. Dear Gentlemen,

    Welcome to America, where it’s usually either 1938 (Munich) or 1963 (Jim Crow), and when it’s not, it’s both years at the same time, like now! The Liberal imagination is utterly exhausted. Everything is a recapitulation of the said dates and figures and learning new lessons is strictly forbidden. Where’s Walter Hines Page when you really need him? Mummies, indeed!

    Sincerely,

    Andrew

  4. The key is to separate Virginia issues from national issues. A third party that isolates itself to Virginia could take root. The core issue isn’t going to be whether or not to tax data centers. The key is ending legalized corruption in Virginia. The story is easy to understand. Unlimited campaign contributions flow from big companies into the coffers of Virginia politicians. These funds can be spent on pretty much anything the politician wants with no requirement for adequate record keeping and no audits by any governmental agency. In other words, the big companies are handing the Virginia politicians money for their personal use. Don’t believe me? How would you see:

    $2,645 for “HOTEL DINNER LUNCH PARKING VEHICLE EXPENSE (9/29/2011)”

    $1,872 for “BUSINESS MEAL (3/16/2011)”

    $1,485 for “reimbursement restaurant expense (9/20/2016)”

    $1,124 for “Bookbinder’s Restaurant, Dinner with lobbyists to discuss industry related issues (2/23/2012”

    $582 for “HOTEL BUSINESS BREAKFAST (4/2/2011)”

    No names of people at the various hideously expensive dinners, lunches, etc. No receipts. No explanation of the purpose of the expense. Two, three and four word descriptions.

    https://www.vpap.org/candidates/47/service/25/?start_year=all&end_year=all

  5. It always makes me pause when I catch myself agreeing with him, but Stewart might be right here. It depends on what the special tax rate for such facilities is in his county, and what the other counties around do charge. These companies can’t expect these favorable tax preferences to last forever – and they should always be limited with sunsets and revisited. There is nothing wrong with the county taking another look from time to time.

    If we are talking about real estate taxes, good tax policy is that all companies in various businesses pay the same rate and it should be based on their full fair market value. If we are talking about the gross receipts (business activity) tax, then more variation is indicated. Any business facility is looking to the locality to maintain the roads, pay for police and fire and rescue, maintain a good school system – and they all should pay. (And don’t forget most VA localities collect a local excise tax on electricity, which these data farms should also be paying at the same rate as other industrial users.)

    Frankly I have never seen a whit of difference on these local tax issues between the parties. Members of both parties seem equally tempted to create special tax breaks to compete for a company siting decision, and once it reaches a tipping point, have to deal with the existing local businesses who finally figure out they are subsidizing it.

    • In Prince William the rate is $1.25 while the rate for all other businesses and residential personal property is $3.70. The Data Center rate has not changed since it was arbitrarily set back in the 80’s or 90’s. Corey’s model is to equalize the rates and use the additional revenues to offset real property and perhaps BPOL rate reductions.

      By comparison here are the neighboring jurisdiction rates (last time I checked) which match their residential/business rates:
      Loudoun $4.20
      Fairfax $4.57
      Fauquier $4.65
      Alexandria $4.75
      Arlington $5.00
      Stafford $5.49

      • That’ right, we are talking about business personal property – taxes on the computers, not the building. These days you walk into just about any major office and you will find a server or a full bank of servers. Not sure why they should be taxed more at a bank HQ or an engineering firm than at a data farm – except it creates an incentive to outsource the work!

        • That is exactly the point and extends to other business equipment up to and including the POS systems and pouring systems at your local watering hole. I have seen restaurants hit with several grand in bills for that tax. BTW, like most things, this was not originally Corey’s ideas but like many things in the past where he was agin’ it before he was fer it, it is “his” idea now.

        • I did not realize we are NOT talking about a tax increase here above the norm for data centers in PW, but the removal of a tax preference. Thanks for the clarification, MOM. It’s hard to understand how the data centers make such a “contribution to the tax base” at the low, discounted rate unless the normal rate is set too high — but that would be another discussion. All other things equal, I’m for equal treatment of like property.

    • Oh, right – you wanted to discuss if there is an opening for a third party to take root. It took the impending crisis over slavery and secession to destroy the Whigs and launch the current GOP. First the Whigs had to implode, and the party most likely to implode right now is again the Republicans. But it looks like the current crop of Bernie Bro’s and the Nattering Nabobs of Negativism/Effete Snobs of the MSM just can’t seem to put ‘ol Trump away. If I were a betting man I would be hedging November 2018 now – the House might stay Republican, if more tight.

      DJ is right about corruption but both parties are deep in it so that won’t be the wedge issue, just like nobody can talk about sexual misbehavior any more (need to go see the Chappaquiddick movie…) Nothing to see here, everybody does, move along people. Deficit spending? Nope. Gun control? Nope. Hero worship (or disparagement) of dead white Confederate generals and their Lost Cause? Nope. Nativism/America First certainly overcame the demographic tide in 2016, but demographics is still destiny.

      • My thinking was that the Libertarian Party could make headway talking about how corrupt both the major parties are in Virginia.

        How did Saslaw spend $1,124 on dinner with lobbyists at Bookbinder’s? I added up the most expensive appetizer, most expensive entree, two most expensive sides and the most expensive bottle of wine. That came to $502. Add a C-note for a tip and you’ve got $602. Is Saslaw claiming he bought the lobbyists’ dinner too?

        At some point if the campaign funds are spent on outrageous personal extravagances don’t they become taxable as income? Do ypu think the boys and girls in the General Assembly are claiming their campaign contributions as taxable income on federal and local tax returns?

        Maybe the Libertarians ought to try to Capone ’em out of office with help from the IRS.

  6. The Libertarian party already takes voters from the Republican party, enabling the Democrats to win. We need run-off elections that require a majority of votes to be elected. Then we can start with many parties, including start-up parties.

  7. I don’t think we’re going to get anywhere with a 3rd party..myself… they’ll end up caucusing with one party or other , otherwise – their “vote” really does not count.

    But I DO LIKE the phrase and the concept of “Jungle Primary” and I especially like it when the GOP selects fools like Stewart to run against the Dems!

    • If the third party voted as a block they wouldn’t need many politicians to basically control the state’s policy. How many key votes come down to the two parties voting along party lines? A few Libertarians voting for or against Medicaid expansion would have made a lot of difference.

  8. I think if folks REALLY want to challenge the two party control – it will take more than a few pesky faux-libertarians.

    “True” libertarians … I mean seriously true Libertarians and not libertarian lite or faux… pretty much do not exist – and even if they did – only the most wacko of the electorate would actually vote for them. Most votes for libertarian are “protest” or ” any guy but him/her” votes…

    Here’s the deal. Some folks are SO frustrated with the two parties, they SAY they’re willing to do almost ANYTHING to take away their power – but when push actually comes to shove we separate the men from the boys when it comes to chaos government… and the truth is… apparently – there are a good number of people who will chose chaos government… these days.

  9. There is a difference between the concept of a 3rd party and whether or not that 3rd party movement would be rooted in Libertarianism which basically advocates a lot less government across the board to include public education and things like Medicare…even public roads so most of the candidates are not hard core but basically more affiliated with the “less govt”wing of the GOP.

    So a question might be – what kind of 3rd party movement would ALSO attract Dems who also wanted some alternative to the two-party stranglehold on govt.

    what would be the basic principles of such a party because hard-core Libertarianism . would not cut it in attracting Dems.

    • Populists without Twitter accounts? A modern incarnation of Teddy Roosevelt’s Bull Moose Party?

      Talking about Virginia rather than the national political environment … I think you could make a lot of headway against both parties with a populist / honesty / transparency / anti-crony capitalist platform. It’s bad in Virginia right now. There’s the axis of evil – Dominion, Altria and Omega Protein and the leadership politicians from both parties profiting from them. But peel back the onion and there’s another layer of crony capitalism below the axis of evil. The wine and beer distributors who act as legislated middle men between producers and retailers, the auto dealerships who use legislation to prevent Virginians from buying their cars directly from the manufacturer over the internet. Peel more and find more. The special tax breaks which never expire handed out to friends and family of our General Assembly. The BPOL taxes that vary not just county to county but industry to industry. The fact that our state government somehow believes it should be in the retail liquor business. Wealthy landowners who benefit from Metro while average citizens foot the bill. Politicians who pocket campaign contributions from the monied special interests without effective disclosure laws regarding their use of those funds.
      The list goes on and on.

      Virginia is a deeply corrupt state where monied special interests have considerably more power over our legislature than in most (all?) other states. The losers, as always, are the average citizens who have to make up for all the largesse our legislature heaps on the monied special interests in return for the monied special interests funding the lavish lifestyles lived by our state politicians.

      The true cost of crony capitalism and special interest legislation in Virginia has never been calculated. Any group that could calculate this cost and then effectively communicate the grievous cost that legalized corruption puts on the average citizen would have a decent chance of taking a chunk out of both political parties.

      • Yes, not just in the GA but in its agency stepchildren. Thus this in the paper on Saturday: “Corruption at Va. Department of Transportation is ‘rampant,’ contractor says” — “All seven defendants said in court that the corruption at the [VDOT] is endemic to the culture and more extensive than the scheme [kickbacks from snowplow contractors] that put them behind bars. “It is happening now, it will happen in the future. It is rampant, and it is part of the culture of the agency.” https://wapo.st/2pL6Egu

  10. be that as it may….. candidates without party affiliation are at a disadvantage with most voters who are lazy and like conventional/mainstream less they vote some whacko into office….

    and even “normal” candidates would have to tell how they would expect to have an influence on legislation and the General Assembly as a whole – as … a tiny minority – at least initially. There ability to influence votes would require the other two parties to be more or less evenly split. If either one gained a working majority – they would not “need” the 3rd party.

    Also – if you don’t like the arguments above – consider the history of 3rd parties in the US and/or Va over the last..say 200 years… not impossible -but a pretty steep climb. For better or worse , most average voters tend to “like” the “idea” or “concept” of their Dem or GOP orthodoxy -.. what they hate is what both have evolved to. If they could find “good” Dem or GOP candidates.. they’d go for them… if they did not think they would also get drawn into the rest of the corrupt morass.

    • More than lazy. I suspect many voters don’t really understand they have the option to influence the choices put before them by the two parties. Look at the pathetic turnout in State conventions and primaries.

  11. A friend of mine, Waverly Woods, explains this in a most explicit and easy way: #FakeNews!
    What is actually happening is these companies have had a 20yr sweetheart deal. They NEVER paid the same taxes as the citizens in PWC. They paid far less than even other business owners. Their sweetheart deal is about to expire and Corey does not want to renew it. By not continuing that crony business practice those major companies will have to pay exactly what everyone else pays. It will save the taxpayers of PWC over 20 million. It’s a good thing but those companies don’t want you to know that. They want you to believe Corey is raising taxes because they want their crony deal to continue.

    • Enough with the BS, there is no sweetheart deal to expire. The rate is what the rate is and has never been changed since its inception in the ’80’s or ’90’s. As there is no “expiration” to the adopted rate, the only option is change it and that is what Corey proposes. Stick to the actual facts, there is no need to embellish them.

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