SALT LAKE CITY — As the nation experiences rapid growth in artificial intelligence infrastructure and large-scale data center development, policymakers and communities in Utah seek a better understanding of how these projects may affect property taxes and local government revenues. A new public finance brief from the Kem C. Gardner Policy Institute explains how Utah’s unique Truth in Taxation system creates both opportunities and challenges as data centers become a larger part of the state’s economy.
“Data centers present both opportunities and challenges for Utah’s property tax system,” said Maddy Oritt, director of public finance research at the Gardner Institute. “Understanding how Utah’s Truth in Taxation system treats real and personal property is essential for evaluating the long-term fiscal impacts of individual projects. Careful, project-specific analysis can help communities maximize the benefits of data center investment while minimizing unintended tax shifts for existing taxpayers.”
Key findings from the brief include the following:
Data centers can provide initial property tax relief for existing property owners – Because data centers add substantial amounts of taxable personal property, existing taxpayers may initially see lower property taxes as the certified tax rate adjusts down. A hypothetical $2 billion data center with $1.5 billion in personal property can significantly reduce the certified tax rate in the first year, particularly in smaller counties where it may represent a large share of the total property tax base.
That initial relief may be followed by future tax increases and greater volatility – As computer equipment rapidly depreciates and faces replacement, Utah’s Truth in Taxation system can create a “boomerang effect” that shifts property taxes back to homeowners and other taxpayers. For example, $1.0 billion in GPU equipment declines in taxable value from $1.0 billion to $620 million after one year and to just $70 million after five years, creating upward pressure on certified tax rates. The report also notes that data center equipment replacement schedules will impact overall volatility.
Utah law treats real and personal property differently – New buildings (real property) generate new property tax revenue for local governments, while increases in personal property (such as computer equipment) shift taxes among taxpayers rather than increasing local revenues. For example, $500 million in new real property generates approximately $3.4 million in new property tax revenue at a hypothetical 1% tax rate, while $1.5 billion in new personal property generates no new revenue under Utah’s “new growth” definition.
Smaller counties face the greatest potential impacts – A single large data center can represent a substantial share of the local property tax base, making tax shifts more pronounced than in larger counties. The analysis finds that a $2 billion data center would exceed 20% of the property tax base in 21 Utah counties and would exceed the entire existing tax base in six of the state’s smallest counties.
Each proposal deserves careful fiscal analysis – The magnitude of property tax impacts depends on factors such as equipment replacement schedules, project area status, valuation methods, and the size of the local tax base. The report also notes that valuation appeals involving billion-dollar facilities could significantly affect taxpayers, particularly in smaller counties.
The full brief is now available online.
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