When Big Business Gets a Tax Break, Who Picks Up the Tab?

When Big Business Gets a Tax Break, Who Picks Up the Tab?

By a local small-business owner

The Frankfort City Council has now voted to approve the agreement for the DataOne AI data center, including a 10-year tax abatement.

And I'll admit it: the more I think about the tax-abatement side of this, the more frustrated I get.

Not because I am against growth.

Not because I don't want new businesses coming to Frankfort.

And not because I believe every data center is automatically bad for a community.

My frustration is much simpler than that.

I own a small business. Like thousands of other small-business owners across Indiana, when our property-tax bill comes, we pay it.

When we buy equipment, hire another employee, improve a building or take a chance on expanding, nobody normally shows up offering us a decade of preferential tax treatment.

We make the investment. We take the risk. We pay the taxes.

Then a multibillion-dollar company comes to town, and suddenly tax abatement becomes part of the conversation.

At some point, I think small-business owners are allowed to ask:

Why?

And maybe more importantly:

Are these abatements actually accomplishing what we've been told they accomplish?

This Is a Huge Project

There is no point pretending DataOne's project isn't significant.

DataOne has described an approximately $7.5 billion AI data center campus on roughly 115 acres in Frankfort, including an approximately 800,000-square-foot facility.

The company says it expects approximately 200 permanent on-site jobs once the facility is operational.

Those are big numbers.

There is also a legitimate financial argument being made in favor of the project.

Gary Smith of Reedy Financial Group, the city's financial adviser, presented projections showing approximately $331 million in value to Frankfort through 2054.

According to that presentation, approximately $825 million of the project would be real property. The arrangement includes a 50% abatement on real-property taxes for 10 years. Smith projected approximately $20 million in real-property taxes would be abated while approximately $80 million would be collected over 25 years.

Those figures are projections, not guaranteed results, and taxpayers should be able to see and understand the assumptions behind them.

But if we're going to question an abatement, we should also be fair enough to acknowledge the projected benefits.

DataOne has also said it would pay for electrical infrastructure associated with the project, including substations, with one temporary substation ultimately being transferred to Frankfort.

Those are real considerations.

But $7.5 billion and $331 million are numbers so large that most of us can't really relate to them.

So let's bring this back down to Main Street.

What Happens When a Small Business Wants to Grow?

Imagine a local business owner decides to put $250,000 into their business.

Maybe they renovate an old building.

Maybe they buy equipment.

Maybe they hire three more people.

Maybe they've already been here for 20 years.

They've sponsored Little League teams. They've donated gift certificates to fundraisers. Their employees live here. Their kids go to school here. They buy from other businesses here.

That expansion probably isn't going to make the news.

Nobody is going to hold a press conference over three new jobs.

But those three jobs matter to three families.

And when that business's tax bill arrives, they're expected to pay it.

That's where I struggle with the way we talk about "economic development."

Why does economic development so often seem to mean finding the next giant company instead of helping the businesses already here become bigger?

So I started digging.

I wanted to know whether my frustration was supported by actual research.

What I found deserves more attention.

Ball State Researchers Have Already Looked at This in Indiana

This isn't just an argument among frustrated small-business owners.

Researchers Dagney Faulk and Michael Hicks at Ball State University's Center for Business and Economic Research studied Indiana's economic-development incentives.

Their findings made an important distinction.

They found that state-level economic-development incentives performed better than local property-tax abatements.

Local property-tax abatements were another story.

Ball State reported that its research cast "significant doubt" on whether Indiana's local property-tax abatements were effective at creating jobs, increasing the tax base or controlling property-tax rates.

The researchers estimated that roughly $30,000 in lost local tax revenue was associated with each new manufacturing job created through local abatements during the period they studied.

They also found an association between heavier use of abatements and higher property-tax rates for existing taxpayers.

Importantly, the researchers cautioned that they could not establish which caused which. Abatements could contribute to higher rates, or communities with already-high rates could be more likely to use abatements.

That's an important distinction, and we shouldn't exaggerate what the research proves.

But we also shouldn't ignore it.

Indiana university researchers have questioned whether a tool routinely used in the name of local economic development is actually accomplishing its intended purpose.

That doesn't mean every abatement is bad.

It means we should stop treating the word "abatement" as automatically synonymous with "economic development."

Would the Company Have Come Here Anyway?

This may be the most important question of all.

Economist Timothy Bartik of the W.E. Upjohn Institute for Employment Research reviewed 34 estimates from 30 different studies examining economic-development incentives.

His conclusion was striking.

Typical incentives probably change a company's location, expansion or retention decision only about 2% to 25% of the time.

Put another way, Bartik concluded that for at least 75% of incentivized firms, a similar location, expansion or retention decision likely would have happened without the incentive.

That doesn't tell us whether DataOne would or would not have chosen Frankfort without an abatement.

We don't know that.

But it gives taxpayers every reason to ask:

If we didn't give you the tax break, would you still come?

And I don't mean asking the question casually in a meeting.

I mean trying to determine the answer before committing public tax policy to the deal.

If factors such as land, electrical capacity, transportation, infrastructure and location already make Frankfort attractive enough to secure the investment, taxpayers deserve to know how much additional incentive is actually necessary.

The Biggest Companies Have the Biggest Seat at the Negotiating Table

There's another part of the incentive system that should concern small-business owners.

Economists Cailin Slattery and Owen Zidar studied state and local business incentives nationwide. Their research was published in the Journal of Economic Perspectives.

They found that recipients of firm-specific incentives are usually large establishments in manufacturing, technology and high-skilled service industries.

In the deals they studied, the average discretionary subsidy was $178 million for 1,500 promised jobs.

The researchers found evidence that winning one of these projects can increase employment within the particular industry receiving the investment.

But they did not find strong evidence that firm-specific tax incentives increase broader economic growth at the state and local level.

That's an incredibly important distinction.

A ribbon cutting is easy to photograph.

A billion-dollar investment makes a great headline.

Neither one, by itself, answers whether taxpayers received a good return.

I Don't Blame DataOne for Asking

I want to make something very clear.

I don't blame DataOne—or any other company—for asking for an abatement.

If somebody offered my business a legal opportunity to substantially reduce its taxes, I would certainly listen.

Most business owners would.

A company has a responsibility to negotiate the best deal it can.

Our elected officials have a different responsibility.

Their job is to negotiate the best deal they can for the community.

Those aren't necessarily the same thing.

That's why asking hard questions about an abatement isn't anti-business.

It's exactly what we should be doing before making a long-term economic-development agreement involving public tax policy.

The Public Concerns Matter Too

People showed up.

Residents have raised questions about water, electricity, noise, lighting, taxes, environmental effects and transparency.

DataOne held public open houses where company representatives and experts addressed many of those subjects.

Some people came away encouraged.

Others remained strongly opposed.

That's worth acknowledging too.

Public opposition by itself doesn't prove that a project is bad. Elected officials sometimes have to make decisions where reasonable people strongly disagree.

But when there is substantial public concern and preferential tax treatment is involved, I believe the standard for transparency should become higher, not lower.

People deserve more than:

"Trust us. This will be good for the community."

Show us.

Let's Put the Deal on a Scoreboard

This might be the simplest thing we could change.

I'm tired of economic-development announcements where everyone hears the giant investment number on day one but almost nobody hears the final score 10 years later.

So let's keep score.

If we're going to grant abatements, publish the results.

How much was actually invested?

How much tax was actually abated?

How many jobs were promised?

How many were actually created?

What wages were promised?

What were the actual wages?

How many employees live locally?

What additional expenses did the city incur?

How much additional tax revenue was actually collected?

Were all of the company's commitments fulfilled?

And when the abatement ends, is the company still here?

Put it online.

Update it every year.

Let taxpayers see whether the investment worked.

If an abatement turns out to be a tremendous success, I'll be the first to say we should look at doing more of them.

But if it doesn't deliver, we should be equally willing to admit that.

What About the Businesses Already Here?

Here's the part of this discussion I would really like to see Frankfort explore.

If tax abatements are an effective way to encourage investment and job creation, why shouldn't we make meaningful incentives more accessible to businesses already here?

Create a program where an existing Frankfort or Clinton County business that makes a substantial new investment and creates new jobs can qualify too.

Not because they're politically connected.

Not because their project has enough zeros behind it.

Because they created measurable economic value.

Imagine 50 existing businesses each adding two employees.

That's 100 jobs.

Imagine helping local companies renovate vacant buildings, purchase equipment and expand.

Imagine giving an entrepreneur enough breathing room to turn four employees into eight.

None of those projects individually makes a $7.5 billion headline.

Collectively, however, they create something incredibly valuable:

A diverse local economy.

And that's the kind of economic development we don't talk about enough.

This Isn't Really About DataOne

That's ultimately where I've landed.

This discussion is bigger than one company and one project.

It's about what we believe economic development should look like.

I want companies to invest in Frankfort.

I want good jobs.

I want our tax base to grow.

I want our young people to have reasons to stay here.

And if DataOne ultimately produces hundreds of millions of dollars in community benefit, creates good jobs, fulfills its commitments and becomes a good neighbor, that should absolutely be acknowledged.

But wanting growth doesn't require us to stop asking questions.

A $7.5 billion project has people at the negotiating table looking after its interests.

Small businesses have to speak for themselves.

We're here before the giant development arrives.

We're here paying taxes while incentives are negotiated.

And most of us intend to still be here long after the ribbon cutting.

Maybe it's time economic-development policy started treating that kind of commitment as an investment too.

Because the next great economic-development project might not be a $7.5 billion facility.

It might already be sitting on Main Street, wondering whether it can afford to hire one more person.

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Sources

Ball State University Center for Business and Economic Research, Local Tax Abatements Not Working, Dec. 6, 2013.

Timothy J. Bartik, W.E. Upjohn Institute for Employment Research, “But For” Percentages for Economic Development Incentives, 2018.

Cailin Slattery and Owen Zidar, Evaluating State and Local Business Incentives, Journal of Economic Perspectives, Spring 2020.

Clinton County Daily News reporting on DataOne's Frankfort project, public meetings and fiscal-impact presentation, September 2026.