Economic development legislation championed by Oregon Gov. Tina Kotek is poised to dramatically expand the state’s tax breaks for data centers, which are already among the largest in the nation.

Oregon data center operators will save nearly a half-billion dollars in local property taxes this year through three different incentive programs. Kotek’s legislation, House Bill 4084, would expand the fastest growing of those three programs.

The standard enterprise zone program provides property tax exemptions for up to five years for new industrial activity in urban and suburban parts of the state. HB 4084, which advanced through a key committee this past week, would double the length of those tax breaks to 10 years.

That means participating companies — chiefly data centers — could save twice as much. It also makes more cities eligible to participate in the enterprise zone program, which could provide an incentive for data centers to move into more communities.

(Separate economic development legislation, Senate Bill 1586, also proposed expanding the enterprise zone program. But lawmakers dropped that provision this month and focused primarily on expanding available industrial land.)

Oregon lawmakers conceived the enterprise zone program in the 1980s as a tool to attract small manufacturers, but they put no cap on how big the incentives could be and attached minimal job requirements.

The tech industry cashed in by siting data centers on hundreds of acres of industrial land in Hillsboro. Property that might otherwise have been used for electronics manufacturing — factories that can employs hundreds or even thousands — now hosts giant server farms that typically employ just a handful of people.

A Hillsboro data center operated by social media company TikTok, for example, is saving $5.6 million this year through the enterprise zone program even though it has just 11 local employees. That works out to more than $500,000 in tax breaks for each worker.

The data center influx has left Hillsboro with very little vacant industrial property so data centers are now looking at nearby communities like Forest Grove, where a California company is now building the first of two large data centers in an enterprise zone adjacent to a residential neighborhood.

Hillsboro data centers saved $45 million in local property taxes last year through the standard enterprise zone program, two-thirds of all the money the program gave away statewide. This year, the data centers will save double that through the same program, nearly $90 million. (The state hasn’t compiled 2026 figures from other industries yet.)

The data center industry is responsible for nearly all the growth in Oregon’s electricity usage, and that has severely strained the state’s electrical grid. The same phenomenon is playing out in other parts of the country, and elected officials in states such as Arizona, Illinois, Michigan and Maryland have proposed reining in the industry and limiting their tax breaks.

Oregon is poised to move in the opposite direction by increasing the industry’s incentives. That baffles Jody Wiser, from the watchdog group Tax Fairness Oregon, who calls the idea “patently ridiculous.”

The boom in artificial intelligence has tech companies building data centers pretty much anywhere they can find power and land. So Wiser said it’s “totally a waste” for Oregon to sweeten the pot.

Neither the governor nor any state legislator has specifically suggested that Oregon needs bigger data center tax breaks. So Wiser said she suspects the governor’s office and legislative leaders didn’t understand how the enterprise zone program is being applied in the 21^st Century and advanced the legislation without recognizing that data centers would be the primary beneficiaries.

“Frankly, I don’t think they really realized it. My sense is they didn’t really get it that almost all of the money is going to data centers,” Wiser said. “By the time they realized it they needed the bill to move.”

The governor’s office didn’t directly respond to questions about whether Kotek actually wants larger data center incentives. Instead, her staff highlighted other provisions in the bill designed to accelerate permitting, prepare industrial land for development and update economic development tools.

“The intent behind HB 4084 is to create opportunity for every corner of the state,” Anca Matica, spokesperson for the governor, wrote in an email Friday. “The governor’s effort to expand this economic development tool is intentionally broad and inclusive, not targeted at any single community or industry.”

In her email, Matica noted that a study of Oregon tax incentives from 2022 found that the standard enterprise zone program delivers $29 in economic output for each $1 in tax breaks. That study analyzed results only up through 2020, however, long before the state’s current data center boom.

Even so, the study found that data centers created “significantly” fewer jobs than other industries that participate in the enterprise zone program.

Rep. Pam Marsh, D-Ashland, was among the lawmakers who voted to advance HB 4084 in a legislative committee Thursday. Marsh said she favored closer scrutiny of data centers’ tax breaks and economic impact, but said the Legislature should wait to act until after it receives recommendations from a workgroup Kotek appointed last month to study the industry.

The panel holds its first meeting Friday, but the group has already said it won’t issue any recommendations about data center tax breaks. Still, Marsh said she believes the industry deserves a thorough examination in next year’s full legislative session.

“It is not at all clear to me that data centers provide public or economic development benefits that justify the incentives,” Marsh said. “This issue is inevitably going to come back in 2027.”