The Cult of Data Centers

Big Tech sways too many economic development officials, and local residents are fed up.

Photo credit: Beyond DC

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According to Data Center Watch, which tracks opposition to data center development, there were 20 data center projects, totaling $98 billion in potential spending, that were blocked or delayed in the second quarter of last year. That’s more than all of the projects that were similarly derailed since 2023, combined.

Those numbers jibe with news articles, social media chatter, and what I’ve heard talking to advocates across the country, as proposed data centers have earned the ire of residents from Arizona to Michigan to Alabama to Indiana and more.

In particular, the nondisclosure agreements that data center owners and operators employ to push their projects through the approval process have been winning increased media attention and community knowledge. “NDAs BETRAY,” read the sign of one protestor in Oklahoma, for instance.

Political reporters are also picking up on the fact that opposition to new data centers may make for good politicking in 2026. (You heard it here first!) As Pennsylvania State Sen. Katie Muth recently put it “Pay attention Pennsylvania! Big tech corporate bullies are invading municipalities anywhere near energy infrastructure (transmission lines, nuclear power plants, methane gas lines) all across PA to build hyper scale data centers to profit from AI bs.”

Indeed, the connection between data centers — which house the infrastructure for storing, processing, and moving data — and the AI slop they enable is increasingly a flashpoint in these debates, as residents wonder why they should bear the burden of boosting a technology that is explicitly meant to eliminate their jobs, and that also undermines their democracy.

Politicians are also connecting the dots between popular discontent with energy prices and the haste with which utility regulators approve the power plans of proposed data centers and gift them discounts on utility costs. For example, Arizona Attorney General Kris Mayes filed a case against the state’s utility commission, alleging that it improperly ceded its authority when determining the cost of energy for a proposed data center.

But that widespread popular pushback is still being met with entrenched data center boosterism from economic development officials and too many politicians who still want to support big tech’s incursion into their communities, in what I’m going to henceforth call the “cult of data centers.”

That cult stems from many factors, but among them, as I’ll discuss below, are: the lack of imagination from which too many economic development officials suffer; a fatalism that infects too many leaders in parts of the country that have been left behind by decades of neoliberal policies and economic development failures; corporate consolidation leaving communities with fewer options for attracting existing businesses; and associations between data centers and Silicon Valley that shouldn’t exist.

But first, the facts and figures. While exact numbers are elusive, the U.S. has something like 5,000 data centers, ten times the amount located in the next most popular country, Germany. And there are several costs these data centers levy on communities.

The first is literal: the increasing amount of public subsidies data center operators receive from state and local governments. As Good Jobs First reported last week, Virginia lost $1.6 billion in sales and use tax revenue to data centers in 2025, up 118 percent from the year prior. That story is the same in state after state, with public subsidies to data centers ballooning in costs and totaling billions of dollars annually.

Other costs don’t necessarily show up on a government tax ledger but are still very real, such as the strain data centers place on energy and water resources (and the costs that can potentially be transferred to residential utility customers), noise pollution, and environmental degradation.

Meanwhile, most of the purported benefits of data centers when it comes to economic development are illusory: They don’t create many permanent jobs (though they do create a short-term boost in construction work, which is why many trade unions support them despite community opposition). They also don’t create any knock-on development effects, despite what tech lobbyists argue, because they are large, ugly, soulless buildings surrounded by large parking lots that no local business owner in their right mind wants to locate next to. There’s a reason the only things that tend to pop up next to data centers are other data centers.

Data center operators’ use of secret agreements and regulatory shortcuts also undermines trust in government and democracy, as citizens rightly feel local officials are foisting projects upon them by intentionally making the process opaque and by preventing the disclosure of key facts, such as how much power and water a proposed data center will require or how many jobs it will actually create.

There’s also a non-trivial chance that tech and AI-related firms have simply overestimated how much capacity they’re going to need, and are in the process of building a bunch of data centers they won’t complete or may even abandon, leaving communities with nothing but a big ugly box or a deserted construction site. If an AI bubble pops, all of the promises tech firms have made to various communities could be broken, even if not for malicious reasons.

So why the continued support from so many in the economic development bureaucracy? There are a few factors.

First, one benefit to municipalities of data centers is usually real: Increased property tax revenue. Indeed, that’s the main rejoinder from data center boosters: Opening a new data center will bring in funds that can help the municipality’s bottom line. “It would almost certainly become the dominant part of our tax base,” said one city manager backing a proposed data center. “When you can surpass Walmart, which is right now the biggest taxpayer in our community, there is a big incentive to look at this.”

But this where the lack of imagination comes in: Economic development officials, city managers, and the like can’t seem to conjure up anything that could bolster their economies and bring in new revenues other than dominant, extractive corporations, which these days often means a data center. And sure, a data center will provide more revenue than a hole in the ground — even more than a big box store, maybe! — but that’s not the sum total of the available options.

Alternatives would be based on investing in livability, entrepreneurship, and local businesses — i.e., making their communities pleasant places to live, work, raise families and start businesses — that will pay higher dividends in the long run.

But boosters act like the choice before a community is always a data center or literally nothing, and their job is to complete the deal, not be the best steward of the public dollar and the public trust. (It’s also not even necessarily true that data centers are revenue positive, if the property tax and sales tax exemptions offered are more than whatever revenue is coming in.)

The second real factor driving official data center support is that much of the country has been hollowed out by decades of bad tax, trade, labor, and energy policy that shipped our manufacturing base overseas and replaced it with Amazon warehouses, dollar stores, and tech and finance hubs on the coats.

Data centers are a tangible influx of at least some economic activity, and bring some of that big tech, Silicon Valley shine to places that have suffered due to those policy mistakes and haven’t benefited from the accumulation of capital in a handful of big cities — even if the jobs aren’t really tech jobs and there aren’t that many of them, and no other tech capital will follow in the wake of a data center opening.

Plus, it’s true that this era of corporate consolidation has left fewer suitors for communities looking to bring in new businesses. And since all the political science research reveals that big projects, and the media coverage and events surrounding them, move votes in meaningful ways, elected officials are willing to go to bat in the hopes they receive that same benefit from a data center and all with which it’s loosely associated.

So if you ignore all the downsides, minimize the risk, pretend there are no other options, and bask in the glow of tech CEOs promising to rain prosperity down upon your town or county, you can almost justify going to any lengths to secure a data center project.

Hence, the cult.

Now, much of what I described for data centers could also be applied to other notorious corporate subsidy favorites, such as pro sports facilities, movie productions, and warehouse and distribution centers. And to be clear, it’s not that we don’t need some data centers. But big tech interests have pushed for so many, so fast, with so little information — in fact, with the intentional circumventing of public input — that it inspired a local response that is different in the particulars but similar enough everywhere.

Even the Trump Administration’s support for data center development and reliance on a handful of tech firms to keep the stock market rising isn’t resulting in the sort of polarization that tends to emerge when the White House weighs in on an issue. The data center backlash has touched red and blue states, and communities across the political spectrum in each of them, with remarkably similar results.

And that backlash will also inspire a policy response. Lawmakers in four states have already proposed abolishing their state’s data center tax exemptions this year, including Arizona Gov. Katie Hobbs including a call to do so in her state of the state address this week:

It’s time we make the booming data center industry work for the people of our state, rather than the other way around. If we are to be successful, we must rethink our state’s approach to data centers more broadly. More than a decade ago, we made a strategic decision to grow data centers by creating a tax exemption for them – I voted for it. Now, Arizona is a national leader in this sector. We must ask ourselves: should taxpayers continue subsidizing the data center industry?

I know my answer. My executive budget will eliminate the Data Center Tax Exemption, putting an end to a thirty-eight million dollar corporate handout. And I’m glad legislators in both parties agree with me – I can’t wait to get to work and get this done.

I’ve seen several other pieces of legislation restricting the sort of land on which data centers can be built or even placing a full-on moratorium on development, akin to what Sen. Bernie Sanders unsuccessfully proposed at the federal level. In Michigan, a federal Senate candidate has proposed a “terms of engagement” for data centers based on transparency, job guarantees, and protection from utility rate hikes for residents.

Since the tech industry has lobbied up and is prepared to plow significant money into state-level elections, it remains to be seen how many of those measures will be enacted into law. But it’s certainly possible that the popular discontent overwhelms those dollars, and a new kind of politics emerges as a result of the tech industry’s hubris. And maybe that’s how the cult comes apart.

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SIMPLY STATED: Here are links to a few stories that caught my eye this week.

• New York City Mayor Zohran Mamdani announced a new effort to crack down on junk fees and subscription traps.

• Google is reportedly experimenting with directly providing home listings.

• The New Jersey legislature is advancing $300 million in public funds to renovate the Prudential Center, home to the NHL’s New Jersey Devils, whose owner also recently received more than $6 billion in public subsidies from Washington, D.C., for a new stadium for the NFL’s Washington Commanders.

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