When it comes to AI data centers, public policy is not keeping up with public opinion.  In recent years, state and local governments across America have raced to install dozens of generous tax breaks, aimed at enticing data center construction projects. But the latest opinion poll from Gallup shows 7 out of 10 Americans do not want the massive computing hubs built in their communities. Now, policy makers are deciding whether to stand by the lucrative data center tax deals, or to repeal them. “The sense in the community is that the data centers need us — they need a place to build — more than we need them,” said Assemblyman Andrew Macurdy (D–Summit), a New Jersey lawmaker who recently introduced legislation to reclaim half of the $500 million in data center tax credits approved by former Gov. Phil Murphy under a 2024 program called “Next New Jersey Program – AI.” Macurdy and his co-sponsors want to use $250 million in repurposed tax credits to give residents relief on their utility bills and to invest in clean energy projects. Just outside Macurdy’s district, a 400,000 square-foot data center project in Kenilworth has already been granted the other $250 million in tax credits under the same program. That benefit, awarded to AI giant CoreWeave, would not be impacted if lawmakers were to approve Macurdy’s bill.    Last month, protesters opposed to the CoreWeave facility gathered outside a local planning board meeting holding signs that read “No More Data Centers in NJ” and “No Tax Breaks for AI Companies.” CoreWeave, which has pledged to create 143 new jobs at the Kenilworth computing hub, did not respond to a request for comment.  The Data Center Coalition, an industry group representing data center owners and operators, defended the use of tax incentives to attract investment from its members. “Data centers are really the underpinning of our modern digital economy,” said Khara Boender, Director of State Policy for the Data Center Coalition. “There really are significant economic benefits that come along with these projects.” Boender cited a study, commissioned by the Data Center Coalition, that concluded data centers directly employed more than a million people and contributed more than $200 billion in local, state and federal taxes during 2024. She suggested much of the negative sentiment around data centers involved nervousness about emerging AI technologies, which may tend to eclipse all of the popular products that data centers have enabled over the years. “The streaming services, the online gaming, the keeping in touch with our loved ones via virtual calls. All of that is supported by data centers,” Boender said. According to an analysis by the National Conference of State Legislatures, 38 states offer dedicated tax incentives for data centers, including property tax abatements and exemptions from sales or use taxes. New York, Connecticut and New Jersey are among the states that offer data center tax breaks. As New York’s legislative session drew to a close, lawmakers were considering a bill to repeal the state’s tax exemptions on products and services purchased by data centers. Policymakers in Albany were also weighing a bill that would impose a three-year moratorium on the construction of new data centers. The fate of those proposals was unclear as of this article’s publishing.  Connecticut’s most recent legislative session adjourned without lawmakers voting on a bill that would have repealed that state’s AI data center tax benefits. In New Jersey, more than 60 environmental, labor and community organizations have urged Democratic Gov. Mikie Sherrill to impose a temporary state-wide pause on data center construction. Sherrill has stopped short of endorsing a moratorium, instead announcing a series of proposals requiring data centers contribute to electrical grid upgrades and improve transparency related to energy and water use. Sherrill declined to say whether she supports the state’s data center tax breaks, but after questions from the I-Team, the NJ Economic Development Authority announced it would suspend efforts to award the remaining $250 million in tax credits available under Next New Jersey Program – AI. “As of today, the NJEDA is temporarily pausing the acceptance of applications for the Next New Jersey Program – AI while it conducts a review of the program,” wrote Chris Flores, a spokesperson for the agency. “The NJEDA is committed to supporting this emerging industry and the economic opportunities it can create for New Jersey residents, such as good-paying jobs. However, being a leader in AI innovation must be done in concert with Governor Sherrill’s efforts to ensure data centers operate responsibly and within strong, transparent guardrails.” As policy makers on the state level face backlash over AI tax breaks, a number of smaller-town mayors and city council members are also taking heat from their constituents. In Vineland, the mayor and city council faced criticism this year after approving a five-year property tax discount for data center buildings under construction on a former plot of farmland. The deal, called a Payment In Lieu of Taxes (PILOT), charges no property tax on newly constructed buildings in the first year and gives discounts between 20-80% on new buildings in years two through five.  Michael Atkinson, a neighboring flower farmer, said he believes the data center owner would have happily located to Vineland with or without the tax break. “We didn’t need to bring them here,” Atkinson said. “If a business is coming here regardless, why should we have to give them a tax break?” Two neighbors of the Vineland data center recently filed a class action lawsuit alleging the facility is generating a humming noise that is “loud, annoying, and pervasive.” The Republican mayor of Vineland, Anthony Fanucci, defended the tax deal, which he said is available to all qualified businesses – not just data centers. “We understand and respect concerns from residents regarding affordability and property taxes,” Fanucci said in a statement to the I-Team. “However, expanding the commercial and industrial tax base is one of the most effective long-term ways to reduce the burden on residential taxpayers by creating additional sources of revenue and strengthening the local economy.” DataOne, the owner of the Vineland campus, said the project is creating more than 600 construction jobs and will pay 100% of local property taxes after the five-year tax deal expires. Namoi Race, a spokesperson for the data center firm added that the company is taking concerns about excessive noise seriously and investing in sound mitigation measures. “DataOne’s goal is to be a long-term partner to Vineland—creating jobs, supporting local businesses, investing in workforce development, and helping position the region as a leader in next-generation technology infrastructure while operating responsibly and sustainably,” Race said. ...read more read less