New hyperscale AI data center proposals have proliferated in Kentucky since early 2025, when the legislature passed general statewide tax incentives to lure their construction. Now, the governor wants those same incentives repealed.
Kentucky Gov. Andy Beshear said in his weekly press conference Thursday that the state should do away with data center incentives, echoing bipartisan criticism in recent weeks.
“I don't think data centers need incentives,” Beshear said. “I don't think we should be providing them, and so I would certainly support rolling back any of that.”
The Kentucky Center for Economic Policy, a left-leaning think tank, issued a report last month showing the state could lose more than $2 billion of sales tax revenue if just four of the proposed data centers are built.
Lawmakers created the data center incentives in 2024, which only applied to Jefferson County, exempting them from sales and use taxes for 50 years on their computer equipment. In 2025 they expanded incentives to all 120 counties.
While many states have offered tax breaks to lure data center companies, some states are reversing course in the face of lost revenue and constituent backlash against data centers. Ohio, Arizona, Nebraska and Illinois have all paused such tax incentives, while governors in several states — as politically diverse as Texas and New York — have called for a moratorium on data center construction.
Beshear said the wealthy companies looking to build data centers in Kentucky can construct them without financial assistance from the state.
“These are some of the wealthiest companies in human history,” Beshear said. “They can afford the construction.”
The governor added that some unnamed companies who are “transparently” speaking with communities where they want to build “seem to be moving away from even applying for (tax breaks).”
At least two lawmakers of the Republican supermajority in Frankfort have also made recent comments indicating the data center tax incentives may be rolled back when the General Assembly returns in January.
Sen. Robby Mills of Henderson, the chair of the GOP Senate caucus, wrote in a Facebook comment two weeks ago that he believed the data center tax break “is going away or will be substantially reduced. The tax exemption are not needed to attract these huge investments now, (in my humble opinion).”
In a meeting that week, he also asked whether the tax incentives were necessary and floated the idea of reducing them to 10 years.
"The business has changed so much from the last two years to where data centers are looking for speed to market," Mills said, adding, "maybe the speed to market may be even more valuable than a tax incentive."
Mills later backtracked a bit on those comments, telling Kentucky Public Radio that data centers are a rapidly evolving industry and “there are ongoing conversations and a lot of factors” for lawmakers to consider.
“We’ve been looking at this issue since session, and the goal is simply to make sure we get the policy right for Kentucky,” Mills said.
In a Facebook video Monday, Republican state Rep. Timmy Truett of McKee endorsed repealing those tax incentives and said he expected a bill to do so.
“Obviously, I'm not for any type of tax breaks or tax incentives for these mega data centers,” Truett said. “And there are legislation that's going to be proposed in this upcoming session that's going to go back and take those away.”
Truett also spoke favorably of Beshear’s executive order three weeks ago to force data center companies to bear their own electricity costs, as well as House Bill 593 from the 2026 session.
The bill of GOP Rep. Josh Bray from Mount Vernon would have required data centers to not pass electricity costs off to other ratepayers and abide by local rules in order to be eligible for tax incentives. HB 593 passed the House by a wide margin, but was stopped in the Senate due to skepticism from GOP Senate President Robert Stivers of Manchester.
Stivers said in an interview last week that he and other lawmakers are carefully studying the data center issue and want to address it intelligently in the upcoming session. He called on Beshear to discuss the issue with legislators, as they are the ones who set policy, not the governor.
“He could set some parameters, work with us and call us into a special session,” Stivers said. “Because he has that power.”
Beshear addressed Stivers comments in his press conference, saying the Republican leader hasn’t reached out to him.
“Robert Stivers hadn't communicated that to us at all,” Beshear said. “I'm happy to talk to him about it. You don't call a special session unless you have an agreement in place. So if that's something that he wants us to consider, we need to directly communicate about it.”
