Data Center Sentiment is at an All-Time Low

What This Means and How We Should Respond

Per the Washington Post, data centers have become increasingly unpopular in Virginia, with only 35% of people supporting their construction in the community today, down from 69% in 2023. This stark decrease should not come as a surprise, especially when one considers how prevalent the arguments against the proliferation of data centers have become. This is quite an interesting contrast to the importance that they play in modern life and the central role they have in economic growth.

Addressing the concerns

Unfortunately for proponents, the arguments against the construction of new data centers are rather strong. These massive, windowless blocks of concrete come with a myriad negative externalities, all of which directly impact the local community. From increasing the cost of living to providing measurable health risks, data centers do seem to have a lot of ground to cover before they can find their way back into the good graces of the general public.

Equally unfortunate, however, is the use of misinformation to alter public opinion. For example, one of the most common points of evidence used by those who oppose the construction of data centers is that they use a great deal of water, and that doing so could have extraordinarily harmful effects on the environment. The issue is that many people are continuing a discourse that started with Karen Hao’s Empire of AI, in which she made the claim that a single data center used 1000 times more water than a single city. The real number, of course, is far lower, sitting around 0.22 times, but now that their water usage has entered the conversation, it is difficult to move forward without it.

Other common criticisms of data centers, such as that they increase the cost of land and electricity use, are largely true, but should not come as a surprise to a careful, economically minded thinker. Data centers are not unique in that they increase demand for the resources that they consume, and when these resources are also consumed by households, households will, as a result, experience the effects of that rise in demand through higher prices. Once again, Virginia, especially Northern Virginia, has been at the forefront of the coming change. In fact, it is one of the only places in the United States that has shown dramatic and definitive evidence of data centers affecting rising energy costs. Additionally, residents of Loudon County, Virginia, have begun to complain about a low-frequency hum that is constantly being emitted by the data centers, which people now worry may cause health problems.

The list goes on, and if we are to consider it fully, it is challenging not to agree with the data center opponents, who now seek to curb their development. The story not being told, however, is that most of these objections apply similarly to other productive sectors. Large buildings, factories, and office complexes all use a large amount of electricity and water, pollute as a result of their output, and raise land prices. There is a reason that large cities tend to be costlier to live in than rural areas. Scarcity is the law of the land, not some mystical force created by a confluence of computer chips. Thus, it seems that the objection to data centers does not merely come from what they consume throughout their operation, but also the product itself.

Data centers produce more than just AI.

At least, this should be the case. People tend to correlate data centers with AI language models, such as ChatGPT and Claude. With this in mind, it would stand to reason that people would then have similar feelings regarding AI and the data centers that maintain it. The issue is that this isn’t the case. A poll found that 48% of people viewed AI favorably, while 46% viewed it unfavorably. This, when compared to the 35% in favor of new, local data center construction, is a clear mismatch of preferences, where people enjoy the product yet do not appreciate the effort necessary to create it.

But data centers do not only produce AI. It is no exaggeration to say that data centers have become the very backbone of society, and that without them the entire world would collapse. As the centerpiece of the information sector, data centers are the reason you are able to use Google Drive, invest online, order food with DoorDash, and so many more things that have made our lives more convenient. On top of this, 46% of the world’s data centers are in the United States, and a recent report from S&P Global shows that they contributed as much as half a point to our GDP growth in the second quarter of 2025.

Thus, it is clear, at the very least, that data centers do provide a great amount of good to society. How, then, should we address the issues that they present to society?

We should be focusing on the tax side, instead.

From an economic perspective, data centers do pose a problem. More than almost any other industry, they receive a large amount of tax breaks that allow them to more easily develop. The tax breaks vary by state, but among them in Virginia is a sales tax exemption on the purchase of qualifying equipment and software, reducing costs by nearly $1 billion in 2023, and local property tax exemptions of up to 89%. This might sound good, perhaps even innovative, but the issue is that these tax breaks are actually distortionary, essentially granting data centers an upper hand that they otherwise wouldn’t have had. This means that on top of the already existing negative externalities that they produce, the government is also essentially subsidizing this social cost and enhancing the negative effects.

The solution, then, is simple. We should not ban the construction of data centers, nor should we disproportionately tax them to discourage their construction. Instead, we should remove these tax breaks and have data centers step back into the competitive market so that they can reinforce our infrastructure without the distortions of government intervention.