New report: Data center subsidies are a bad deal for North Carolinians
As data centers rapidly expand across North Carolina, a new report from the NC Budget & Tax Center finds that taxpayers are subsidizing one of the world’s most profitable industries while receiving little in return. The report concludes that data center tax subsidies cost the state and local governments hundreds of millions — and eventually billions — of dollars, create very few permanent jobs, raise costs for households, and place growing demands on communities’ water, energy, and infrastructure.
The report, “North Carolina’s data center subsidy problem,” recommends eliminating all state and local tax subsidies for data centers and adopting a two- to three-year statewide moratorium to allow policymakers time to develop a comprehensive regulatory framework that protects communities, taxpayers, and natural resources.
“North Carolinians should not be footing the bill to subsidize some of the most profitable corporations in history,” said Alex Campbell, NC Budget & Tax Center Public Policy Analyst and author of the report. “Billions of dollars are already being invested in data centers in response to demand. Tax subsidies aren’t driving those decisions. These subsidies are just draining resources that could help fund schools, affordable housing, health care, disaster recovery, and other priorities that make our communities stronger.”
The report notes that while lawmakers eliminated one electricity tax subsidy for data centers in this year’s budget, several other costly tax breaks remain in place. Based on estimates from the Department of Commerce, one remaining sales tax exemption alone could eventually cost North Carolina roughly $250 million every year once currently announced projects are operational, while construction-related exemptions could total between $1.5 billion and $2.3 billion during the current buildout.
The report also finds that:
- North Carolina already has more than 60 operating data centers, with at least 30 more confirmed to be planned or under construction, and potentially many more projects underway.
- Hyperscale data centers typically create only 50 to 150 permanent jobs, many of which are lower-paying positions or filled by workers from outside the local community and state.
- Data centers increase demand for electricity and water, contributing to higher utility costs, additional pollution, and greater strain on local infrastructure.
- More than 20 North Carolina communities have already adopted local data center moratoriums as they seek time to better understand and regulate the industry’s impacts.
“The question isn’t whether North Carolina should welcome innovation,” Campbell said. “The question is whether everyday North Carolinians should be paying higher costs so highly profitable corporations can receive unnecessary tax breaks. We can support economic growth without subsidizing an industry that places extraordinary demands on our communities while providing relatively few long-term benefits.”
The report argues that North Carolina should instead require data centers to pay their fair share, strengthen transparency around any existing incentives, and establish comprehensive environmental and utility regulations before allowing additional large-scale development. It recommends a statewide moratorium lasting two to three years to give lawmakers, experts, and affected communities time to develop thoughtful, evidence-based policy.
Read the full report, “North Carolina’s data center subsidy problem.”
