West Virginia looks to AI data center boom to help eliminate state income tax

West Virginia leaders are escalating the debate over data centers, with Gov. Patrick Morrisey unveiling a seven-point plan developed with lawmakers to reduce and eventually eliminate the state income tax while addressing concerns about natural resources and infrastructure.

The plan comes as data centers are becoming a political flashpoint nationwide, with states looking to cash in on billions of dollars in investment and new jobs while communities raise concerns about utility costs, water use and local control. The massive facilities needed to power the artificial intelligence boom are also driving electricity demand higher, putting new pressure on power grids across the country.

"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 said in a statement obtained by Fox News Digital.

The second listed "principle" in Morrisey's plan says all West Virginians should benefit from data center projects approved through Charleston's "High Impact Data Center Designation (HIDC)" process and the revenue they generate. The process was established under a separate 2025 state law.

Morrisey's plan includes "direct tax relief for citizens," with none of the HIDC revenue entering the state general fund.

"By law, 50 percent of project revenue is dedicated directly to reducing and ultimately eliminating the State Personal Income Tax," the plan reads.

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 flashpoint across parts of southern West Virginia that have struggled since the coal industry's decline.

"This shared framework gives us the exact blueprint we need 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 wild and wonderful state we call home," Morrisey said.

But the promise of tax relief comes as some West Virginians are raising concerns about who could bear the costs of the state's data center expansion.

"No Data Centers" signs are becoming common along roads in Jefferson and Berkeley counties and neighboring Clarke County, Virginia, as residents point to nearby Loudoun County, Virginia, where sprawling data center development has increasingly pushed up against residential subdivisions and commercial centers.

Back in West Virginia, some state lawmakers are pushing for additional safeguards as data center development accelerates.

"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 love our property rights," he added.

But Morrisey emphasized in comments to Fox News Digital that "all West Virginians must directly benefit from data center revenue."

"By statute, 50% of the proceeds … will be dedicated to directly reducing and ultimately eliminating the state income tax."

"[It's] very powerful [and] it's going to benefit many, many West Virginians."

West Virginia income taxes have already been falling. Sen. Jim Justice, R-W.V., signed a record 21% cut while serving as governor, and Morrisey followed with another 5% reduction this year. The top marginal rate stands at 4.58%.

A spokesperson for West Virginia House Speaker Roger Hanshaw said the plan came from the governor's office but echoes what the legislature enacted in the 2025 law.