As Data Centers Expand, Environmental Champion Seeks to Drop Incentives 

Governor Josh Stein is proposing that North Carolina drop or modify its tax incentives for the development of new data centers. 

Hyperscale data centers are a growing flash point in the debates over energy affordability, climate change, and rural land use. Studies show that they drive up the cost of electricity, especially to residential customers, have adverse quality of life impacts on nearby rural communities, and are disproportionately driving utilities’ plans to build out methane gas infrastructure to provide their power demands. 

In his comments to last week’s meeting of the NC Policy Task Force, Gov. Stein cited another concern: the rising loss of state revenue from the tax incentives that permit data centers to avoid sales taxes on materials used in construction and the electricity they use in operation. “When this tax break was enacted in (2010) and then widened in 2015, we lived in an entirely different world. At that time, no one could have predicted the explosive growth of data centers and how much energy they consumed,” said Stein. “And because data centers at that point were a brand-new industry, they benefited from financial incentives to induce capital to invest. Those days are long gone.” 

Data Centers Should Pay Their Fair Share

An NC Dept. of Commerce analysis estimates that data centers – which are already receiving the sales tax incentives – are avoiding the payment of $45-57 million annually in sales taxes. If all planned data centers are constructed, the state would forgo an estimated $1.5-2.3 billion in sales taxes during their construction period and another $450 million annually during their operation. “Given the trillions of dollars of capital that is flowing freely into data center construction, they simply do not need economic incentives to occur. The market is already delivering the incentives,” Stein said.

The details of Stein’s proposal for Task Force consideration included either repealing the incentives altogether or making them contingent on powering the centers with carbon-free energy sources and controlling water resources impacts.

You can see further discussion of the impacts of data centers and the growing resistance to their development in North Carolina.