Data Center Subsidies: A bad deal for North Carolinians

Big tech is investing billions of dollars into data centers and the infrastructure needed to support the buildout. Meanwhile, instead of regulating this highly extractive industry and making corporations pay what they owe, some North Carolina lawmakers continue to slash away at income tax rates and barrel ahead to eliminate the corporate income tax entirely by 2030.  

Although the new state budget eliminates electricity subsidies for data centers, it leaves intact several other subsidies for data centers, including one that is expected to cost the state billions of dollars in tax revenue over the coming years. This is all occurring in the midst of skyrocketing energy prices, a forecasted state budget shortfall that means NC will be unable to maintain current spending levels due to ongoing tax cuts, and a push for two constitutional amendments that would make it more difficult for the state and local governments to raise revenue to fund the services that enable North Carolinians to thrive.  

We need sensible policy that taxes corporations, that ensures that our collective resources are not being used to subsidize highly profitable tech firms and a booming industry, and that regulates data centers to protect our communities and the resources they need. A statewide 2- to 3-year data center moratorium would provide lawmakers with the time to craft intentional policy that protects households from bearing the costs of data centers in their utility bills, water quality, and the air they breathe.

There is rapid growth of data centers in NC 

A data center is a space full of computer servers that store, process, and manage significant volumes of data. Data centers are needed for cloud storage, e-commerce, video streaming, machine learning, and AI. They can range from a small server room to giant warehouses and entire “data center campuses.”  

Data centers are not new. They’ve long been used for telecommunications, at hospitals and universities, and in the government. However, with the growth in AI, machine learning, and cryptocurrency in recent years, there has been an explosion of investment in hyperscale data centers — i.e., very large data centers.  

There is no universal database on the total number of data centers in the US or specific states, counties, or municipalities. Further complicating matters is that, given the variation among data centers in size and resource demand, different publications and firms use different definitions for what constitutes a data center.  

According to our analysis, as of July 2026, there are over 60 data centers confirmed as operating in NC and at least 30 more confirmed that are planned or under construction.  

However, the industry is often secretive about new projects to prevent opposition from communities, making it difficult to confirm the existence of new projects. Aterio, an independent firm that tracks the industry through satellite imaging, puts the number of data centers being planned or under construction at more than 60, meaning that the total number of data centers could be on track to at least double in the coming years.

Tax incentives for data centers are costing the state tens of millions  

To incentivize investment in strategic sectors and geographies and spur job creation, governments offer standing tax subsidies or one-time incentive deals. These offerings can reduce tax liability, offer cash grants, or provide infrastructure development or job training assistance. Essentially, these offerings make the investment more attractive to private capital by reducing the cost of the investment directly or indirectly.

The cost of state tax subsidy programs is expected to rise dramatically 

The state budget passed and signed into law in July 2026 eliminates sales and use tax exemptions on electricity for data centers. These subsidies allowed data centers to pay no sales and use taxes on any of the electricity used at their locations.  

Although states and local governments are required by Generally Accepted Accounting Principles (GAAP) to report the revenue lost through these kinds of tax subsidy programs, this is not being done in NC (nor in many other states). As a result, there is a lack of transparency about how much programs like these cost and even how many data centers are taking advantage of them. 

However, in April 2026, NC Commerce published a report estimating the cost of at least some of these subsidy programs. According to this report, the sales and use tax subsidy on electricity was costing the state at least $20 million annually, and once those data centers that are planned or under construction are complete, the cost was projected to rise to at least $160 million annually.  

The repeal of this subsidy is welcome. But the budget leaves intact three additional subsidy programs for data centers, and the program that it eliminated is far from the costliest of the bunch.

Eligible entity	Eligible exemptions	Type of tax exemption	Eligibility requirements
Data center	Support equipment used at the facility	Sales and use tax exemption (full)	Invest at least $75 million in private funds. Meet county-tier wage standards. Provide health insurance for full-time employees
Internet data center1 N.C.G.S. 105.164.3(79a) defines an “internet data center” as any data center business engaged in software publishing included in industry 511210 of NAICS or an internet activity included in industry 519130 of NAICS.	Business property used at the facility	Sales and use tax exemption (full)	Invest at least $250 million in private funds   Locate in a low-income (Tier 1 or Tier 2) county.
Internet data center	Computer software used at the facility	Sales and use tax exemption (full)	None

 

Based on the same report, it’s estimated that the first of these three programs has a far steeper cost to the state. 

• Current losses: NC is currently losing about $25 million in sales tax revenue annually from data centers through the first tax exemption program. 

• Projected losses from new construction: Based on the data centers that have been announced or are under construction, it is estimated that NC could lose between $1.5 billion and $2.3 billion in sales tax revenue cumulatively during the construction build-out as a result of this program. 

• Projected future annual losses: Once this full build-out is operational, NC would lose around $250 million in sales tax revenue annually — an increase of 900 percent. 

These projections are based on data center projects that have been announced as of December 2025. Not all of these will necessarily be built, but other additional projects may also be announced and built. Based on data from states that do a better job of disclosing tax revenue losses through data center tax subsidies, we know that these costs can increase by thousands of percent in just a few years because of how rapidly the industry is expanding.  

For instance, in Texas, the state Comptroller office estimated that data center subsidies would cost about $130 million in FY 2025. In a follow-up report, the office raised that projection to $1 billion for the same year, and they estimate that the program will cost $1.7 billion in 2030 alone — a 1,200 percent increase from the initial $130 million estimate. In Illinois, tax subsidies for data centers cost about $10 million in 2020. In 2024, the costs had ballooned to $370 million — a 3,600 percent increase.  

Since the estimates by NC Commerce only include the first of the three state sales and use tax exemption programs listed in the table above — and, furthermore, they only consider projects that have been announced or are under construction without accounting for the accelerating growth rate of the industry — these numbers provide a conservative estimate of how much data center tax subsidies are costing and will cost the state. 

Local tax subsidies are adding to the costs 

In addition to these standing state sales and use tax exemption programs, local governments in NC have offered company-specific deals that partially exempt specific data centers from property taxes. 

There is no comprehensive database of these local property tax exemption deals. But a common structure for these deals is that, for a given data center project, in exchange for a certain level of investment and jobs over 10-20 years, over that same period a company receives: 

• 50 percent real property tax exemption (land and buildings) 

• 65 to 85 percent personal property tax exemption (servers and equipment). 

Examples of deals like these include The Town of Maiden and Catawba County’s deals with Apple and Microsoft; The City of Lenoir and Caldwell County’s deal with Google; and Richmond County’s deal with Amazon.  

There is less information available on estimations of the property tax revenue that is lost through these programs, but one estimate of the deal with Apple is about $20 million over 10 years.

Data center subsidies are bad policy 

With all this tax revenue being lost to an already rapidly expanding industry and highly profitable tech firms, the question arises whether these programs and deals make sense and are a good use of our tax dollars.  

To answer this question, we need to consider the purpose of economic development incentives like these and whether these tax subsidies for data centers fulfill that purpose.  

The purpose of economic development incentives is to influence private market decisions by reducing costs so that investments are more attractive that may not otherwise be profitable, or at least as profitable. This can be for a variety of reasons, but most often it’s to: 

• Incentivize investment in specific sectors 

• Influence location decisions 

• Spur job creation 

• Fulfill some broader social purpose such as, for example, subsidizing renewables and energy efficient homes to reduce climate emissions, grocery stores in food deserts, or the employment of previously incarcerated individuals 

By considering each of these different goals, we can see that none of them are relevant to data centers. Big tech is already investing heavily into data centers, and data center location decisions are not based on tax-related considerations. These data centers are not bringing with them jobs at a scale that would make these subsidies make sense, and data centers bring with them numerous other harms and costs to communities.  

Investment into data centers is already occurring at a staggering rate

Unlike investment in renewables, the data center build-out is already happening at a staggering rate in response to market demand. Globally, investment in data centers for 2026 is over $800 billion. Subsidies are not needed to boost investment in the industry.

Tax subsidies play a minimal role in data center location decisions 

Data centers place huge demands on local resources. A single data center can occupy hundreds of acres of land, use as much energy as 100,000 US households, and consume as much water as a town of 10,000 to 50,000 people. Accordingly, what looms large in decisions about data center site location is not primarily tax-related considerations; what matters most is resource (land, water, energy) cost and availability, low regulation, quality infrastructure, and low disaster risk. 

To quote one Microsoft executive, “I can’t think of a site selection or placement decision that was decided on a set of tax incentives.” 

Data centers provide very few permanent jobs 

Hyperscale data centers are extremely capital intensive, and they require very few permanent jobs to run once they are built — typically 50 to 150 jobs per site. 

Tech firms exaggerate data center jobs by including temporary construction jobs 

Tech firms will often exaggerate the number of jobs they will bring by including temporary construction jobs in their project announcements. These jobs can last about two years, but in many cases, they are much shorter.  

For example, in the case of one data center buildout in Ohio, construction jobs lasted 6.5 weeks on average, with 146 workers on site at a time.  

Moreover, specially trained construction workers travel around the country from project to project, meaning that many of these jobs are not locally hired. 

Many non-construction data center jobs are low-paid and not locally hired 

About one-third of the non-construction jobs at data centers are low-paid, entry-level positions with little opportunity for career advancement, such as security personnel, landscapers, and janitorial staff. For example, at one site in NC, out of 69 positions, 25 are security and janitorial staff. Many of these non-construction workers, including even highly trained electrical workers, are hired through temp agencies, make as little as $15 per hour, and have no path to permanent and better paid employment. On average, only about 10 to 30 percent of these non-construction jobs go to state residents who are not already employed. 

Subsidizing data centers to spur job growth is a poor use of our collective resources 

Overall, data centers provide very few permanent jobs, and even fewer that are well-paying and that go to local residents looking for work. That makes the price tag of these jobs for governments subsidizing data centers quite costly. 

While precise figures vary across states, localities, and specific sites, communities can lose more than $1 million in tax revenue for every permanent, non-construction job created through data-center tax subsidies. Simply put, subsidizing data centers is one of the least efficient ways to create jobs.

Data centers pose numerous other harms to individuals and communities 

It’s not just that data centers are not benefiting North Carolinians — they are also imposing costs and harms on our communities.  

• Energy affordability: We already mentioned that data centers are highly resource-intensive. The demand that they put on the grid translates to more investment in energy infrastructure, and, despite the claims of tech firms and utility providers, independent analyses show that these costs are passed on to household rate-payers. 

• Emissions: In addition to higher energy bills, the data center energy infrastructure buildout means the construction of new natural gas power plants, delaying the closure of old plants, and even considering the revival of retired plants. Tech firms have claimed that they can power their data centers with renewables, but this is not what we are actually seeing. Additionally, the need to run non-stop means that data centers cannot rely entirely on renewables, and diesel generators are by far the most common source of backup power for data centers. What this all means is that data centers move us further away from meeting necessary climate targets. 

• Public health: All these emissions translate directly into air pollution and public health problems, such as asthma, heart disease, and lung cancer. The water-cooling systems that data centers use treat water with noxious chemicals that eventually get released back into the water system, containing nitrates, pollutants, and PFAS.  

• Environmental injustice: Because data centers and the coal and gas plants that they rely on are so undesirable, they tend to be located within close proximity to environmental justice communities that already experience disproportionate exposure to environmental hazards. 

• Harmful products: Although cloud infrastructure and AI is used for a variety of purposes, including some that are laudable, they are often used in ways that are harmful to people beyond their impact on public health and the environment — including mass surveillance; abetting ICE, the police, and the military; expansive data collection to run targeted ads; dynamic and personalized surge pricing; various scams and fake pornography; and more.

There are better ways to fund our communities 

Despite all that has been said so far, local governments that are in regions that are already attractive for data centers are nonetheless finding it tempting to offer deals that partially exempt data centers from paying local property taxes. Unlike the existing state programs that offer complete exemptions from certain kinds of sales and use taxes, the local deals generally offer partial property tax exemptions. This means that even with property tax exemptions that forgo tens of millions of dollars, given the scale of these investments and the relatively small size of local budgets, a single data center site may still meaningfully increase local revenue. 

These deals are especially tempting in the current context where local budgets are increasingly under strain because state lawmakers are passing onto counties the cost of federal cuts to key services, like SNAP food assistance. 

Local governments already have limited ability to raise revenue because state law bans local income taxes and restricts the ability of local governments to raise the sales tax. But now additionally, state representatives are pushing a constitutional amendment that would further restrict the ability of local governments to raise revenue through property taxes. 

Further compounding the problem, in other states that have similar property tax restrictions, local governments are forced to rely more on state funding and user fees and fines that fall hardest on people with low incomes. But NC has its own self-imposed revenue crisis because of income tax cuts over the past 15 years.  

The solution, though, is not short-sighted property tax subsidies for data centers that directly harm the communities that they are located in — polluting our air and water and straining the grid and local infrastructure. The solution is for the state to step up, eliminate and prohibit all subsidies for data centers, tax corporations to make them pay what they owe, and use that revenue to pay for services rather than push these costs onto local governments. 

 

NC can be a leader by banning subsidies and passing a statewide moratorium  

Transparency and accountability is not enough; ban subsidies for data centers 

So long as these subsidies for data centers exist, more transparency about them is needed. We should know:  

• the companies receiving these subsidies, including corporate parent companies 

• the location for each project 

• the subsidy amount approved and actually received 

• any additional (non-data center specific) subsidies the company and parent company are receiving 

• if the subsidy includes job, investment, or other eligibility requirements, this should be disclosed publicly

We should have this information provided both by the state and local governments offering tax subsidies for data centers, and there should be accountability mechanisms in place to claw back all subsidies, in full, if the company fails to meet the terms of the agreement.  

But we should not limit ourselves to public disclosure and accountability requirements. More than 70 percent of Americans are opposed to data center construction, and there is bi-partisan support for eliminating all state sales and use tax subsidies for data centers.  

Democrats in the NC General Assembly have filed two bills (H1180, H1063) that repeal all state sales and use tax exemptions for data centers. Although the original bill language has since been replaced by a Committee Substitute, Republicans also filed a bill (H1213) to repeal all sales and use tax subsidies for data centers. House Speaker Destin Hall and Senate President Phil Berger have also both openly questioned subsidies for data centers.  

One of the above bills, H1063, goes further and prohibits local tax exemption deals, as well as any economic development incentives or infrastructure grants for data centers. This is the sort of policy that NC needs. 

Comprehensive regulation is needed 

Beyond repealing tax subsidies for data centers, more comprehensive regulation is needed. H1063 offers a good starting place. Among other things, the bill requires: 

• Pre-construction disclosure on any new data center, including information on water and electricity usage and cooling technologies 

• Certificates of Operation from the Utilities Commission for data centers, which condition approval on various requirements on water use, cooling technologies, and bearing the full cost of electricity usage. 

• An annual report disclosing actual resource consumption and cooling technologies used by each data center. 

• The creation of rules by the Department of Environmental Quality (DEQ) that establish water use standards for data centers. 

But these issues are complex, and given how resource-intensive data centers are, policymakers, agency staff, and other experts need time to study and understand these issues to protect North Carolinians. 

For example, H1063 specifies that DEQ should adopt rules that require data centers to employ closed-loop or reclaimed water systems, meaning that the water used in helping cool data center servers must be reclaimed wastewater or reused within a closed-loop system rather than discharged after a single use. But wastewater recycling and closed-loop systems only modestly reduce the water needs of data centers. Moreover, eventually this water must be discharged, which includes the chemicals the water has to be treated with and the minerals that become concentrated in it. That discharge must be regulated and robust enforcement mechanisms introduced. This includes robust, regular, and transparent water testing, serious fines, and complete service shutdown for violations. 

Similarly, H1063 contains measures that protect rate-payers from bearing the costs of the data center energy build-out. But there are other aspects of energy regulation that need to be accounted for, such as a cap on total energy used by data centers in the state, the ability to curb or shut down power during emergencies and other high-demand periods, and the regulation of backup generators such as prohibition on diesel generators.  

These issues are themselves interconnected, as different water-cooling systems have different energy demands. Moreover, there is an increasing push by big tech to deregulate nuclear energy to power and maintain operations of these huge data centers. This opens another can of regulatory worms.  

The immediate point is that effective regulation requires a full integrative review and approval for each data center, and this process must be informed by a thorough study of data center resource use. These should also be supplemented with input from communities to empower people to have a say in how their community resources are being used.

A state-wide moratorium is needed to provide time to craft sound regulatory policy 

To craft effective and community-informed regulatory policy, we need time. This is why local governments across the state have been passing data center moratoria. As of July 2026, there are at least 23 data center moratoria in the state, including 8 towns, 6 cities, and 9 counties, as well as two data center bans — one in Clay County and another in the Qualla Boundary of the Eastern Band of Cherokee Indians. 

Besides local governments, at least 12 states have already filed data center moratorium bills in 2026. On July 14, New York became the first state to sign into law a statewide data center moratorium. Previously in April, the legislature in Maine passed a statewide moratorium on data centers, but the Governor vetoed the bill, preventing it from becoming law.  

NC has the opportunity to step up as a leader by passing legislation that bans all tax and economic development incentives for data centers and includes a state-wide moratorium on data centers to give policymakers time to craft the sort of informed regulatory policy that we need to protect North Carolinians and communities. Although any amount of time is better than no time, the NC Budget & Tax Center is recommending a 2-to-3-year state-wide moratorium on data centers to carry out the comprehensive study needed — studying the impacts of data centers in consultation with stakeholders and experts, drafting land use ordinances and performance standards, holding public hearings and workshops, conducting legislative reviewal of the data and developing a comprehensive regulatory framework, and holding public hearings around specific proposals before finally adopting the legislation. 

This is what North Carolinians want. The question is whether lawmakers will listen. 

Conclusion 

The bottom line is that there is no reason the state or local governments should be subsidizing an industry that is highly extractive, offers very few benefits, and causes immense amounts of harm — all for the benefit of the most profitable corporations in history at the expense of everyday North Carolinians.  

To build a state where all can thrive, breathe clean air, drink clean water, afford the basics, and live with dignity, we must make corporations pay what they truly owe. We need sound regulatory policy and time to craft this policy in a way that is informed and intentional. North Carolinians deserve a state where people are prioritized over corporate profits.