New Jersey itself is home to many large pharmaceutical companies, and having a data center nearby would be essential if those companies are to use AI to design new drugs, Sullivan said.
“When you have three people sitting around a desk trying to build the next Google, the next Tesla, not just in AI but in any field, this computing power is scarce. And it's very valuable and essential,” Sullivan says. So in addition to the permanent jobs these companies will create, he argues, the tax incentives could lead to more growth and innovation among smaller startups. “The potential economic impact is enormous.”
Still, skeptical policy experts say the AI carve-out may just be a new twist on an old idea at a time when the AI boom will create soaring demand for data centers. [tax incentive] “The deals that build the infrastructure these tech companies need don't benefit taxpayers,” said Pat Garofalo, director of state and local policy for the Project on American Economic Freedom, a nonprofit that advocates for government accountability. The lost tax revenues are “often astronomical” compared to each job created, Garofalo said.
According to Tarczynska's 2016 report, governments often give up more than $1 million in taxes for each job created to subsidize data centers built by large companies, and many data centers create 100 to 200 full-time jobs. While the local impact may be small, the Data Center Coalition, an industry group, sees it differently: One data center job supports more than six jobs elsewhere, according to a 2023 study it commissioned.
In other states, backlash against data centers is growing. In Northern Virginia, home to a high concentration of data centers near Washington, D.C., a political shift is underway as people oppose data center expansion. In May, Georgia's governor vetoed a bill that would have suspended tax incentives for two years while the state studies the energy impact of rapidly expanding data centers near Atlanta.
That hasn't stopped big tech companies from expanding. In May, Microsoft announced it would build a new AI data center in Wisconsin, investing $3.3 billion and partnering with local technical schools to train and certify more than 1,000 students over the next five years for IT jobs at the new data center and in the region. Just a month ago, Google announced it would build a $2 billion AI data center in Indiana, creating 200 jobs. If Google makes an $800 million capital investment, it will receive a 35-year sales tax exemption.
Similar contradictory approaches are playing out in Europe. Cities where companies already have data centers, such as Amsterdam and Frankfurt, are pushing for new regulations. In Ireland, data centers account for a fifth of the country's energy consumption, more than all the country's homes combined, and there are concerns about the climate impact. Meanwhile, other countries are exploring economic opportunities. Before winning the recent UK election, the British Labour Party promised to make it easier to build data centers.
