That means increased taxes over a smaller taxable population, Grabow said. And it also means Dallas-based Applied Digital, which is proposing a 430 megawatt AI data center east of Toronto, South Dakota, is, in the commissioner’s eyes, a means to lowering property taxes.

“We’re merely trying to keep what we had, merely trying to figure out a better way to do property taxes than to burden it on the people,” Grabow said. “If we can spread that across a $400 million billing, we have $1.1 billion of assets today. That’s a nearly-40% increase on our assets that we can spread those taxes across. That’s a 10 to 15% property tax [cut] across the board for those people.”

The economic windfall arguments resembled the debate over carbon pipelines over the last several years, when pipeline companies and some analysts projected an Iowa company’s transmission line could generate billions in the state and lower local taxes, as seen in previous Argus Leader reporting.

DelBianco said businesses and governments have increased their use of the cloud in recent years. The tech industry is tasked with building 50 data centers a year to keep up with U.S. demand, he added.

But the supply can’t be met if South Dakota doesn’t give developers and businesses a big-enough carrot to offset the significant capital investments they would make, DelBianco said.

Nick Phillips, executive vice-president for external affairs of Digital Applied, said South Dakota has been “unintentionally tax[ing] itself out of this market” under the current tax policy.

“The siting decision is binary,” Phillips said. “A project is built here or it is built somewhere else … Other states are capturing the investment, the jobs, and the long-term tax base.”

“The truth is that it’s just fiscally irresponsible to spend a billion dollars on a data center and have the equipment [that] goes in there, be subject to sales tax, when a billion dollar manufacturing, agricultural, another facility doesn’t pay sales tax on its equipment,” DelBianco added . “There are 40 states that exempt the equipment, so we have to pick the states that welcome through that policy.”

Data center opposition says tech threatens South Dakota’s largest industry

But opponents viewed the Big Tech push as an infringement upon South Dakota’s already No. 1 industry: agriculture.

Michelle Oftedahl, a Toronto, South Dakota, farm owner who lives a few miles away from Applied Digital’s proposed data center, spoke to the “unintended consequences” of boosting data centers. Farmland often out-prices what young farmers can afford to break into the ag industry, Oftedahl said, but it’s not too much for corporations with billions of dollars to spare.

Incentivizing data centers, the fifth-generation farmer added, would give rise to companies “buy[ing] land up cheap, knowing that they can cash in on possible future expansion projects, such as power plants, substations, and transmission lines, things that are needed to support the high amount of energy production required.”

“Encouraging large-scale economic development like data centers risks discouraging many young people from choosing agriculture for their future,” Oftedahl said. “This isn’t simply a vote about a sales tax exemption. It’s a statement about our values. Is South Dakota still first and foremost an ag state, or is large industrial economic [sic] now more important?”

Sara Steever, a retired Lennox resident who formerly led Sioux Falls agri-marketing agency Paulsen, questioned whether companies “worth billions and trillions of dollars” needed the tax breaks.

“Turns out that the fact that we can provide access to the megawatts of energy that is needed is tremendously valu[able],” Steever said as a remote testifier. “These companies don’t need tax breaks. They need connectivity, which we already have.”

Dakota Rural Action Lobbyist Melissa McCauley said the bill would lead to a “huge miss on revenue” for the state, given what she perceived as the broad nature of the proposed exemption.

“We are concerned that nearly everything needed to outfit the data center down to its door locks, security cameras, and even the cost of laying the fiber to the center would be exempt,” McCauley said. She asked openly whether a fiscal note should be added to the bill.

Tax break eligibility would not be public record under Roe bill

The stipulation that a data center’s eligibility documents would not be public record rankled opponents—some lawmakers, too.

Austin Adee, a Deuel County resident, said that section of the bill would create an “NDA-shielded secret court.” House Speaker Jon Hansen, who is running for South Dakota governor in 2026, raked the measure over this.

“This particular measure lacks transparency,” said House Speaker Jon Hansen. “The information goes to the secretary of the Department of Revenue, who can unilaterally decide without real qualification whether or not there’s going to be a tax break or not, whether or not rates are going to pass on, whether rate increases are going to pass on to consumers, and the people aren’t entitled to see any of the documentation that supports that decision. I think that’s wrong.”

The bill split the few Democrats on the committee, with Rosebud State Rep. Eric Emery supporting the legislation and House Minority Leader Erin Healy, of Sioux Falls, against it.