People in the U.S. may be in favor of the using internet, social media, and artificial intelligence, but they are increasingly skeptical of and concerned about the data centers that make all these things possible. Common themes of their skepticism were recently expressed by data center opponents in Michigan who “fear lost farmland and destroyed habitat, noise pollution from thousands of humming servers, strain on the electric grid and higher bills as utilities spend mightily on infrastructure to power the facilities, and strain on rivers and aquifers amid data centers’ use of water to cool servers.” Michiganders are not alone.
In many cases, this turning away from data centers, which are low, long-term, direct job creators, occurs after the facilities have received state and local support in the form of tax incentives. At least 37 states offer incentives to data centers, such as sales tax exemptions, infrastructure inducements, and property tax abatements.
The price tag for data center tax incentives is high and is growing
By the state’s own estimates, Georgia is expected to forego $2.5 billion in revenue due to data center sales tax exemptions in fiscal year 2026 alone. This amount is 664% higher than the state’s previous estimate of $327 million.
Maryland implemented a program in 2020 that exempts data centers from sales and use taxes if they create at least five jobs within three years of applying to the program and invest at least $2 million in data center personal property. The first four years of the program cost the state $22 million, with 50% of that cost incurred in 2024 alone.
Ohio offers had a tax exemption for 15 years. The first five years cost the state less than a million dollars a year, but by fiscal year 2018, the cost had risen to an estimated $27 million, and by fiscal year 2020, it was nearly $70 million. The most recent report from the Ohio Department of Taxation indicates that the annual cost is close to $150 million.
Pennsylvania’s latest budget estimates show that the state could lose out on about $2 billion in revenue by mid-2031 due to a tax break for data centers.
Virginia has extended a $3.2 billion tax break for data centers over the last two fiscal years.
Washington does not require most data center operators to pay the 6.5% sales tax on server equipment, including refurbished older equipment nor on labor hired to install the equipment.
Recognizing the revenue impact, legislators in some states have pulled back on the state’s generosity.
The Alabama Senate is shortening the period in which data centers may receive tax abatements from 30 to 20 years. Their bill would also require large-scale data centers pay state sales and use taxes on their purchases. Their bill allows the governor to waive tax requirements for data centers in economically struggling counties.
In Maryland, legislation has been introduced that would repeal the state’s sales and use tax exemptions for data centers.
In 2024, Michigan enacted sales and use tax exemptions on data centers through 2050. But in December 2025, three Michigan legislators cosponsored a bipartisan bill to repeal the legislation.
In Ohio, after threatening to override a Governor’s veto of a data center sales tax exemption, the House unanimously advanced a bill to the Ohio Senate establishing a new data center study commission.
Oklahoma legislators recently reasserted a pullback on data center inducement through legislation that excludes new data centers from the exemption program that excuses manufacturers from paying property taxes for their first five years in business.
In Virginia, Gov. Spanberger has called a special session for lawmakers to finish the FY 2027 budget by July 1; foremost in the debate between legislative chambers is the continuation or elimination of data center tax exemptions. In Washington, the Senate House Finance Committee recently approved Senate Bill 6231, which eliminates data center sales tax breaks. The proposal would eliminate the break for replacing or refurbishing older server equipment, but it would leave in place the exemption for purchasing new equipment. The bill awaits a House floor vote.
Voters most concerned about data centers driving up residential electricity costs
A survey from Navigator Research found that 40% of respondents selected rising utility costs as a top concern. Similarly, a recent Pew research poll found that 38% of respondents thought home energy costs were negatively affected by data centers.
Data support these concerns about utility costs. A report from Innovation Ohio, citing the Institute for Energy Economics & Financial Analysis, notes that, “In the PJM Interconnection, … capacity prices surged from $28.92 per megawatt-day in 2024-2025, to $329.17 just two years later, more than a tenfold increase driven largely by data center demand. Remarkably, data centers account for 63% of this price spike.” The report also notes that, “For an average Ohio family, this (increased data center demand for electricity) translates to roughly $70 additional on their monthly electric bill by 2028, just from data center-related electricity demand.”
Some states are passing legislation to ensure that data centers pay a higher electricity rate than residential customers. Oregon enacted such a law in 2025. In Delaware, similar legislation advanced out of committee in late January 2026. Florida’s state Senate also recently approved a bill that would create new rate structures for data centers.
Legislators in New Jersey passed a bill which would have made data centers pay higher electricity fees, but then-governor Phil Murphy vetoed it. A new bill (S-680) is being debated that would require data centers to use only renewable or nuclear energy to power their facilities.
According to the Innovation Ohio report, Connecticut is leading the approach of requiring data centers to generate their own power. The state may require large data centers to generate their own power through onsite facilities. U.S. Senator Richard Blumenthal of Connecticut has introduced the GRID Act, which requires data centers with significant power demands to obtain power from sources outside the public grid.
Several additional states’ efforts to protect electricity customers are also described in the Ohio report. These include Georgia, which created rules in early 2025 requiring that data centers using more than 100 megawatts of power to pay separately for the infrastructure costs to serve them. The Georgia legislature is now considering even stronger legislation (SB 34) that would explicitly ban utilities from shifting any data center costs to residential customers.
Environmental impacts raising concerns for many communities
A 2025 investigation by Bloomberg News found that more than seven in ten new data center projects built or proposed since 2022 are in communities already experiencing water stress. In December 2025, Michigan state senators advanced Senate Bills 761, 762, and 763 to limit data centers to withdrawing no more than two million gallons of water a day. None of the bills have passed out of committee.
In Vineland, New Jersey, residents are fighting a center under construction over potential pollution, water use, and noise. The 2.4 million-square-foot DataOne center would be one of the largest Northeast data centers, according to the New Jersey Chapter of the Sierra Club.
Data centers are also putting states’ clean energy goals at risk. Six years after Nevada voters approved a constitutional amendment requiring in-state utilities to get half of their power from renewable sources by 2030, NV Energy expects to miss those clean energy standards for the first time. NV Energy does not have enough renewable energy to power the data centers and wants to rely more on natural gas, which is non-renewable and emits carbon.
Americans undecided on overall impacts to their communities
Pew Research found that about one-in-five Americans aren’t sure of data centers’ impact on the environment, home energy costs, people’s quality of life nearby, local jobs, and local tax revenue.
Pew Research also found that only 30% of U.S. adults said data centers are bad for the quality of life for people living nearby. In Pennsylvania, the percentage is a little higher: a recent poll found that 42% of people in that state do not want a data center built in or near their community.
Legislators in many states have decided that it may be time to hit the pause button and enact a moratorium on new data centers. Georgia, Maryland, Michigan, Minnesota, New Hampshire, New York, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont, Virginia, and Wisconsin have recently introduced legislation to temporarily ban data centers. Most recently, Oregon lawmakers voted to advance a one-year moratorium on new tax breaks. Also, recently, a few communities in Ohio have declared moratoriums, including in Lordstown in Trumbull County.
Not all these bills calling for moratoriums have been or will be successful. For example, a bill in South Dakota failed to pass (however, the governor signed a bill into law that ensures data centers will not overburden local resources and will pay their fair share for electricity.) In Michigan, Gov. Gretchen Whitmer opposes any effort to block data center development.
How do data center developers decide where to build these facilities
Innovation Ohio explained the interest in Ohio, noting that “The [central Ohio] region's extensive fiber networks, developable [farm] land, and [close] access to transmission infrastructure have made it especially attractive for large-scale digital operations.” Grist reported on the attraction in Pennsylvania, noting that they were coming to Pennsylvania for the Susquehanna-Roseland powerline, and likely for the area’s “cheap land, lax zoning laws, and centralized capital.”
Another theory is that data center developers search for places where they will find the best resources and the least resistance. The Nevada Independent cited Brian Turner, senior director at Advanced Energy United, an industry association focused on advancing clean energy policy, as saying, “Data center companies are known to put out feelers in multiple states, seeing who can provide power the fastest and cheapest.” Similarly, Utility Dive concludes, “Data centers are shopping around.”
This page was prepared by SSTI using Federal funds under award ED22HDQ3070129 from the Economic Development Administration, U.S. Department of Commerce. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce.