Managing the AI Onslaught: Nix Data Center Subsidies
This article argues that local governments possess significant bargaining power over "Big Tech" companies regarding data center developments and should cease offering tax subsidies. It advocates for increased transparency in economic development deals and for communities to demand fair taxes and energy prices from these companies. The piece suggests that current subsidy practices disproportionately benefit wealthy corporations at public expense, citing revenue losses in states like Georgia, Virginia, and Texas.
The article, published by the Center for New York City Affairs and initially by Next City, argues that local governments in the US have more leverage than they realize when negotiating with "Big Tech" companies building data centers. Authored by Anthony Elmo from Good Jobs First, a national policy resource center, the piece challenges the narrative that data center growth is inevitable and requires local officials to quickly approve zoning, extend infrastructure, and grant tax breaks.
Elmo contends that companies like Google, Amazon, Meta, Microsoft, and Oracle, which are investing hundreds of billions in AI infrastructure, require data centers regardless of subsidies. He criticizes the common practice of negotiating in secrecy, using code names, and offering large tax abatements, arguing these practices deplete public leverage before residents are even aware of a project. Examples from states like Georgia, Virginia, and Texas are cited, which reportedly lose $1 billion or more annually due to data center tax abatements.
The author proposes two key reforms: first, requiring every state and locality to disclose revenue lost to data center tax abatements in their Annual Comprehensive Financial Report; and second, eliminating these subsidies entirely. He advocates for data center companies to pay full sales and property taxes and be placed in separate utility rate classes to prevent households and small businesses from subsidizing new power capacity.
Furthermore, Elmo emphasizes the need for process reforms, including ending nondisclosure agreements and rushed votes, and ensuring transparency regarding a project's electricity and water usage, pollution, and job creation. He suggests enforceable Community Benefits Agreements tied to project costs and job quality standards, including prevailing wages and local hiring, to ensure data center developments genuinely contribute to community growth rather than merely consuming public resources and labor.