Across the country, communities are being told that data centers are their ticket to a front-row seat in the emerging artificial intelligence economy. Developers arrive with polished presentations and impressive dollar figures. Governors and local officials describe these projects as engines of growth and economic opportunity. Utility companies are racing to carry out a staggering one trillion dollars in infrastructure upgrades by 2030, with AI and data centers helping to drive the surge in projected electricity demand.
But beneath the glossy sales pitch lies a murky reality of strained ecosystems, depleted natural resources, and plentiful taxpayer subsidies for some of the wealthiest corporations on planet Earth.
And when a community offers up its land and resources, then gives a data center millions, or even billions, in tax breaks, what does the community actually get in return?
What Are Data Center Tax Abatements?
A tax abatement is not free money, but public revenue a government chooses not to collect. The basic idea is that a community gives up some tax revenue now in the hope that the project will bring enough future benefit to make the deal worth it. According to the National Conference of State Legislatures, at least 38 states now offer dedicated tax incentives for data centers.
These incentives can take several forms. Some states waive sales and use taxes on the equipment needed to build and operate the facility. Others reduce property taxes, offer electricity-related exemptions, or negotiate local agreements that allow companies to pay less than they otherwise would. In some cases, data centers may also benefit from subsidized or specially negotiated utility rates, meaning the public cost of the project may show up not only in lost tax revenue, but also in the utility bills of local residents.
The problem is that these subsidies can become far larger than most people realize. Data centers are not ordinary commercial buildings, and their value is not limited to land and four walls. Much of the expense is constantly running inside the facility: servers, cooling systems, backup generators, networking equipment, software, electrical infrastructure, and other machinery required to keep the system online. And when governments exempt the high-cost parts of a data center from normal taxation, the value of the tax break can grow quickly.
That is especially true when the tax break applies to equipment. Property tax abatements may reduce what a company owes on the building itself, but sales tax exemptions can follow the company through repeated upgrade cycles. Data centers do not purchase servers once and call the project finished. As hardware wears out and AI demands more powerful systems, each new round of tax-exempt purchases can leave more public revenue uncollected.
Texas offers a clear example. Qualifying data centers there are exempt from the state’s 6.25 percent sales tax on purchases related to building and maintaining the facility, including servers, software, cooling systems, emergency generators, plumbing, and other equipment. They are also exempt from state sales taxes on electricity, a major benefit for an industry defined by enormous power demand.
According to the Texas Tribune, Texas is projected to give up $3.2 billion in sales tax revenue over two years because of its data center exemption. By fiscal year 2030, that tax break is expected to cost the state nearly $1.8 billion every year. In plain terms, this means Texas is allowing the corporations that own and operate data centers to keep billions of dollars they would otherwise pay in taxes. It may not look like a direct handout, but the effect is similar: large sums of money stay with the companies instead of supporting schools, roads, emergency services, or other public needs.
Blank Checks for Big Tech?
When most people hear the phrase “tax break,” they may think of modest small-business deductions, such as writing off office supplies, business mileage, a home office, software, or equipment. These deductions help business owners account for the ordinary costs of earning income. But when some of the wealthiest corporations in the world receive billions of dollars in exemptions and other incentives, the issue moves far beyond routine tax planning. At that scale, it becomes a question of whether communities are receiving enough in return for what they are giving up.
Good Jobs First warns that tax-abatement laws written years ago for smaller data centers are now costing governments billions in lost revenue as the industry expands into much larger AI-era facilities. The organization reports that Georgia, Virginia, and Texas already lose $1 billion or more per year to data center tax breaks.
Virginia offers another example of how quickly the public costs of these projects can grow. Northern Virginia’s “Data Center Alley” is home to about 200 data centers within roughly 30 square miles, making it one of the densest concentrations of data centers in the world. According to Virginia’s Joint Legislative Audit and Review Commission, the region now accounts for 13 percent of the world’s known operating data center capacity and 25 percent of capacity in the Americas.
This massive buildout did not happen by accident. Since 2010, the state has used a retail sales and use tax exemption to attract and retain this industry. But at what cost? In 2023 alone, that exemption saved data center companies and their tenants $928 million in taxes. Reporting on the state review found that data centers avoided $2.7 billion in sales and use taxes from fiscal year 2015 through 2024. By 2024, the exemption reached $1 billion and accounted for 53 percent of Virginia’s economic incentive spending.
That scale changes the conversation. These are not small perks tucked into local development deals. They are major public finance decisions, often delivered through the tax code rather than being presented and debated as direct spending.
If lawmakers wrote a billion-dollar check to some of the wealthiest technology companies in the world, the public would likely demand answers. But when the same cost is delivered through the tax code, it becomes harder for residents to see the full price.
The Race to the Bottom
Data center incentives are often defended with the classic race-to-the-bottom argument: if one state does not offer the tax break, another state will.
That logic gives companies enormous leverage. States and local governments are not only competing for land and utility access, but also over how much public revenue they are willing to give up in order to win the project. The question becomes less, “What does this community need?” and more, “How much will the public sacrifice to make the deal happen?”
That pressure is now producing pushback. NCSL reports that lawmakers in at least 28 states with data center incentives have introduced proposals to change those programs, often by adding guardrails around cost or energy demand. At least nine states have considered repealing their data center tax incentives entirely.
But as AI usage rises and demand for data centers grows, companies still need places to put them. That reality should give communities bargaining power, not pressure them into accepting deals that reduce public revenue before the first server is even turned on. The AI economy does not exist in the clouds. It needs land, electricity, water, transmission lines, and local approval. Economic development should not require communities to bid against one another for the privilege of subsidizing some of the wealthiest companies on Earth.
The Jobs Argument Deserves Scrutiny
The strongest argument for data center tax breaks is usually the creation of jobs via construction, permanent operations jobs, technical positions, maintenance work, or contracts for local businesses.
But the jobs argument deserves a math problem, not applause.
The reality is, however, that data centers require enormous capital investment without creating a large permanent workforce. Once built, many facilities are highly automated and may operate with far fewer workers than residents expect. That means a community may give up millions in tax revenue for a project that creates only a modest number of long-term local jobs.
Good Jobs First has warned that data center subsidies can be extremely expensive when measured against permanent employment. In one report, the organization found that earlier subsidized data center deals averaged about $1.95 million in public support per job. A recent New York example shows how stark the tradeoff can become: New York Focus reported that a proposed JPMorgan Chase data center expansion in Rockland County was offered nearly $77 million in tax breaks while promising to create exactly one permanent job.
That does not mean every data center deal looks like that. But it does show why the public should not accept vague promises of “jobs” as enough. Before a community gives away tax revenue, residents deserve to know how many permanent jobs are guaranteed, what those jobs will pay, whether local hiring is required, and whether the company loses the subsidy if it fails to deliver.
The Utility Bill Backdoor
Tax abatements are the visible subsidy, but utility bills may become a sneaky hidden cost. A data center can affect a community long before the first server goes online. These projects may require road access, utility corridors, substations, water infrastructure, stormwater management, emergency planning, legal review, environmental oversight, and long-term monitoring. Some costs are paid directly by the developer. Others may fall to local governments, utilities, or residents through less obvious channels.
For instance, data centers place significant pressure on the electric grid. Their enormous power demand can require new generation, transmission lines, substations, grid upgrades, and capacity payments. Those costs do not always stay with the company creating the demand. When utilities spend billions expanding the system, those expenses can be folded into the rates paid by ordinary customers and spread across residential and small business utility bills.
Even if a data center receives a tax break on its building, equipment, or electricity, the larger public cost may move through the power system. Families may never see a line item on their bill that says “data center subsidy,” but they may still help finance the infrastructure needed to serve some of the wealthiest technology companies in the world.
Residents in some parts of the country are already feeling the strain. In New Jersey, residential electricity prices have risen more than 33 percent from June 2023 through June 2025, leaving customers with some of the highest electricity rates in the continental United States. In 2025 alone, New Jersey’s energy costs rose by 16.9 percent, reportedly the largest annual increase in the nation outside of Washington, D.C. Other areas have seen even sharper spikes: EIA reported that in March 2026, Maryland’s average residential electricity revenue per kilowatt-hour was up 57.6 percent from the year before, the largest state increase in that monthly comparison.
That concern is already surfacing across the PJM region, the nation’s largest grid operator, which serves New Jersey and parts of 12 other states plus Washington, D.C. Reuters reported that rising power costs in PJM are being driven heavily by Big Tech data center demand, with residential power rates projected by some analysts and consumer advocates to rise 30 to 60 percent by 2030. Data centers reportedly account for more than 90 percent of PJM’s projected new power demand.
This is where the public ledger becomes harder to read. A community may be told that a data center is bringing investment, but if that facility helps drive costly grid upgrades or higher regional power prices, residents may pay for part of the buildout month after month. The subsidy may not appear as a check written by the town or a tax break approved at a public meeting. It may arrive quietly, folded into ordinary household bills.
Communities Need a Full Accounting Before They Say Yes
Many data center incentives are approved through dense development agreements, state tax codes, local board votes, utility filings, and economic-development programs that ordinary residents may never know to look for. Even when the information is technically public, it can be difficult to find or scattered across multiple agencies.
That is why transparency is not a minor procedural issue. It is the foundation of public consent.
Before a data center receives a tax break, residents deserve a complete ledger. They should know exactly how much public revenue is being waived, what the company will actually pay, how many permanent jobs are guaranteed, who pays for the infrastructure buildout, how much water and electricity will be used, and what protections exist if the promises are not kept.
These are not radical demands. They are basic safeguards. If a project is truly good for the community, the numbers should be able to withstand public review.
The central question is not whether the future will require digital infrastructure. It will. The question is whether communities will be allowed to defend their resources, their public revenue, and their right to a livable future before that infrastructure is built in their backyard.
Join the Data Center Resistance Project
Moms Across America is gathering volunteers for a Data Center Resistance Project to help track proposed data centers, tax abatements, utility impacts, legislation, community pushback, and wins across the country.
This project is intended to support communities with research, organizing tools, public accountability resources, and clear information they can use when data center proposals appear in their towns.
If you are interested in helping research data center proposals, track tax breaks, review legislation, document environmental impacts, monitor utility costs, or support communities working to protect their land and resources, we invite you to get involved. Please email info@momsacrossamerica.org.