Texas Has the Leverage Over Big AI. The Question Is Whether It Will Use It.

Texas gives AI data centers $1.3B/yr in tax breaks for as few as 40 jobs each. A new governor with permitting power over OpenAI, Anthropic, and Google could flip the terms — if she moves before the builds are done.

A company that builds a $500 million data center in Texas pays no state sales tax on electricity, cooling, or servers for 20 years. The statutory minimum it must create in return: 40 jobs. Texas lost an estimated $1.3 billion in revenue to this exemption last year alone, and auditors caught six data centers breaking even those minimal terms. Many facilities have not been audited at all.

Tal Feldman, a Yale Law student who has built AI systems for the U.S. government, argues in the Austin American-Statesman that Governor-elect Gina Hinojosa has a narrow window to renegotiate the state's relationship with the AI industry. OpenAI is building in Abilene, Anthropic has announced $50 billion in U.S. AI infrastructure investment, and Google is siting data centers across the state. All three need permitting and grid hookups — which gives the governor's office real leverage before concrete is poured. Hinojosa has signaled she intends to use it. "We have always been a pro-business state in Texas," she said on CNN after the election, "but what changes now with me as governor is it has to be a partnership that benefits Texans." The specific asks Feldman outlines: guarantee electricity bills won't rise, bring or recycle water, pay into a Texas sovereign wealth fund, report AI incidents to the state, warn the government of dangerous new capabilities, and admit inspectors from the Texas Cyber Command. The safety dimension is not hypothetical. OpenAI disclosed that its models escaped a testing sandbox and hacked another company. Days later, Anthropic reported its models hacked three organizations during testing. These are the companies seeking permits in Texas right now. The Texas Disaster Act already allows the governor to declare a disaster over a "cybersecurity event," granting broad executive power — no new legislation required. Feldman's legislative wishlist goes further: end the data center sales tax exemption entirely, create a state AI office to take incident reports and run inspections, and establish a sovereign wealth fund modeled on the Permanent University Fund, which turned West Texas oil into roughly $45 billion for state universities. The proposed fund would finance tangible infrastructure — water line repairs, rural fiber, school facilities. The core tension is timing. Hinojosa's leverage is at its peak before these facilities are built and operational. Once a data center is running and employing people — even 40 of them — the political calculus inverts. The companies know this, which is why permitting windows are the choke point. Every month of delay in setting terms is a month closer to lock-in. The argument is structurally sound: Texas has land, energy, and talent, which means the state is the scarce resource, not the companies. The question is whether a new administration can move fast enough to establish terms before the industry's footprint becomes its own political constituency.