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.
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.
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.