Data Centers: Disaster or Dollar Signs?
Last month, Maine Governor Janet Mills vetoed legislation that would have established the nation’s first moratorium on the construction of new data centers. It’s indicative of a broader public backlash against data centers, with data center moratorium bills appearing in ten other states and data center discourse increasingly dominating town hall meetings across the country.
To help legislators and policymakers make pro-taxpayer decisions in the face of this emerging issue, NTU recently released a policy toolkit on data centers. These reports look at some of the biggest concerns taxpayers have about data centers, and how policymakers can make sure that they are getting to the root of these concerns while also taking advantage of the opportunity that data centers present.
Energy Bills
The biggest concern driving this opposition is the perceived impact on energy prices. Americans certainly aren’t wrong that their energy bills are going up, and they aren’t wrong to be frustrated to be paying more for the same service.
But while there are many reasons for rising energy prices, the cost of electricity is not statistically linked to data center construction. Energy prices are nearly identical between the ten states with the highest data center concentrations ($14.46/kWh) and the other 40 states ($14.39/kWh).
This is because while data centers can use a large amount of energy, developers often locate areas where energy sources are abundant and work with local regulators to ensure residential prices are not affected. After all, data centers have every incentive to keep energy prices in their area low. Energy is the biggest operating expense for a data center once it is up and running, so rising energy prices are felt just as acutely by data centers as residential areas.
Instead, rising energy bills are better attributed to general inflation, natural gas price increases, and burdensome regulation preventing the grid from adapting to load increases. Policymakers should focus on permitting reform to allow new power sources to come online sooner, which will reduce energy bills for all ratepayers because of increased supply.
Water Usage and Noise Pollution
Pollution concerns are likewise either overstated or wrongly attributed to data centers. It would take nearly 50 years for the AI industry to reach the level of consumption the agricultural industry undertakes annually. Data center cooling technology is already moving away from the most water-intensive processes. Misconceptions about the amount of water used by data centers are widespread, yet most stem from a book published in 2025 that used a statistic 1000 times larger than the real figure in estimating one Chilean data center’s water usage. The author later issued a correction.
The same is true for noise pollution. Reason magazine notes that the sound the average data center produces is “a little louder than a library and a little quieter than a pickleball court.”
The Solution to Property Tax Woes?
But setting aside the reasons not to fear data centers, there is one very big reason to want to attract them. Probably the only issue state policymakers have heard more about over the past couple years than energy bills is property tax bills. Data centers are a local revenue source that can bring property taxes down for everyone.
Consider Loudoun County, Virginia — colloquially known as “Data Center Alley.” Loudoun County welcomed the first major wave of data centers and is home to the highest density in the United States.
Now, data centers generate nearly half of Loudoun County’s revenue. The result: county officials have been able to lower the property tax rate every year since 2016 from $1.145 to $0.805 per $100. Loudoun now has the lowest rate in the state. Starting in 2026, the County will also be reducing the property tax on vehicles.
Counties welcoming new data centers will probably not become Loudoun County overnight. But by focusing on broad-based, comprehensive energy reforms that make states more attractive to data centers, they can be an important piece of the property tax puzzle.
Read more insights by Pete Sepp, Nick Loris, Debbie Jennings, and Matthew Putnam here.