Texas didn’t stumble into becoming the epicenter of America’s AI economy. It chose to build.
When Governor Abbott stood in Midlothian last November to announce a $40 billion investment — the largest tech investment in state history — that wasn’t luck. And it wasn’t the first time tech leaders have chosen Texas. It was the result of deliberate policy choices Texas made over more than a decade: low taxes, a flexible and fast-moving electricity grid, a workforce ready to wire it all together, and a sales tax exemption that told the world Texas was open for the business of building the future.
Those choices are working.
Importantly, all this growth is happening while being balanced with legitimate community concerns.
First, the Governor signed major grid reform legislation last June, requiring data centers to stand down during emergencies so families and hospitals come first. Second, the state is protecting ratepayers by requiring large new energy users like data centers to put real money down — tens of thousands of dollars per megawatt — just to reserve a place in line for the grid, so that taxpayers and families aren’t subsidizing the cost of building out infrastructure for large tech companies. Third, the state has put new screening in place to keep companies tied to China, Russia, Iran, and North Korea away from critical Texas infrastructure.
That kind of leadership doesn’t happen by accident. It happens when a state gets the policy right.
But in Austin, lawmakers are actively considering repealing the sales tax exemption that helped spark this success in the first place. That would be a serious mistake.
This matters far beyond the boardrooms of tech companies. Texas’s AI leadership means good-paying jobs for the electricians, pipefitters, and construction workers building these facilities; powerful new tools for Texas’s three million small businesses to become even more competitive; billions in tax revenue that funds Texas schools and first responders; and America — not China — setting the rules for the most consequential technology of our lifetime.
Texas lawmakers should keep building on that record — not tear up the foundation that made it possible. If they want to tighten the exemption, sharpen the accountability requirements, or strengthen the standards data centers must meet, that’s a conversation worth having. But there’s a critical difference between reform and repeal. Repealing the policy that made all of this possible wouldn’t protect Texas taxpayers — it would cost them, by sending the next wave of investment, jobs, and tax revenue to other states.
Look at the picture from Richmond. Virginia, the current data center capital of the world, is in the middle of a contentious budget debatetrying to phase out its exemption. Six other states — Georgia, Arizona, Michigan, Maryland, Pennsylvania, Oklahoma — are running parallel repeal efforts. Every one of them is sending the same signal to the market: we built it, but we’re not sure we want it anymore.
Texas should be sending the opposite signal. Loud and clear.
This is the moment the rest of the country looks to Texas —because Texas is the one state with the grid reforms, the investment momentum, and the policy stability to lead. The AI race won’t wait for Austin to relitigate a decision Texas made when this industry was a fraction of what it is today. China isn’t waiting. Beijing is building data centers at a pace that has the Pentagon and Energy Department officials sounding alarms. It matters which country builds the future, and right now Texas is one of the few places in America building it at scale.
Texas built this lead. A misguided call at this moment will direct the next wave of AI infrastructure to states and countries that aren’t second-guessing.
Editor's Note: The above commentary was penned by Doug Kelly, CEO of the American Edge Project. The American Edge Project is a coalition dedicated to the proposition that American innovators are an essential part of U.S. economic health, national security and individual freedoms. The commentary appears in the RGG Business Journal with the permission of the author.
