The rally captured a moment of local frustration that has since spread to state capitols across the country.
Politicians who once competed to lure data centers with promises of jobs and tax revenue are now having second thoughts. At least 28 states that currently offer incentives to the industry have weighed legislation this year to end or shrink those benefits, according to the National Conference of State Legislatures, a nonpartisan research group. The turnabout reflects the rapidly shifting politics surrounding the energy-hungry facilities and their real-world impacts on communities and power grids.
In North Carolina, Gov. Josh Stein, a Democrat, has pointed out that sales tax exemptions for data centers, including exemptions for electricity costs, cost the state up to $57 million every year. “Do we really want to subsidize data center’s consumption of energy and electricity when they make everyone else’s power bills go up?” Stein said in remarks early last month. “It doesn’t make much sense to me.” Democratic lawmakers in the state legislature last week introduced a bill that would regulate data centers and repeal some tax credits.
Other states have pursued similar measures. Washington this year nixed a policy that let data center operators avoid sales taxes for replacement equipment. Minnesota last year scrapped tax exemptions for electricity costs. Nationwide, lawmakers have introduced hundreds of bills that would rein in the industry, forcing companies to pay more for electricity or imposing energy requirements and other strict regulations.
“It’s part of a taxpayer revolt on these things,” said Michael Hicks, an economics professor at Ball State University who has studied data centers. “I think the pushback on these incentives reflects the understanding that the growth in data centers has not necessarily yielded the local benefits that were promised.”
Yet the shift has not been universal. Many policymakers still see value in data centers, and pressure from tech and construction interests have stymied attempts to abolish tax breaks. Several states, including New Hampshire, Oregon and Colorado, have considered adding new incentives. In Maine, Gov. Janet Mills, a Democrat, last month vetoed a bill that would have put a moratorium on data centers, citing the potential jobs impact. She pointed to the development of a data center at an abandoned mill site as an example of the economic promise the facilities can still offer.
The legislative battles underscore a broader tension: Data centers have become essential infrastructure for the digital economy, but their enormous appetite for electricity and water, along with their modest direct employment numbers, have made them increasingly controversial. As more states reconsider the generous tax breaks once seen as a necessary lure, the industry faces a new era of scrutiny and regulation.
