A data center is essentially a building full of computers that store and process information for tech companies, AI tools, streaming services, and cloud software. For years, state and local governments competed hard to attract them, offering tax breaks worth hundreds of millions of dollars on the promise of economic growth and jobs.
New academic research has now tested whether that promise held. The finding: it depends almost entirely on what kind of community the facility lands in.
In cities and their surrounding areas, a new data center does move the needle. In the three years after one opens, local employment rises by around 0.9%, wages by 1.1%, and the number of local businesses by 1%. Stretch to the long term and those gains roughly triple. In metropolitan counties specifically, employment jumps by around 4.1% and wages by 5.5%. The reason is that cities already have what data centers need: construction contractors, equipment suppliers, technical workers, and professional services. The facility plugs into an existing network of economic activity.
In rural counties, that network does not exist. The job and wage gains are negligible. A facility worth hundreds of millions of dollars arrives, construction crews come in, build it, and leave. The permanent workforce is tiny. A large data center employs perhaps 20 to 50 permanent staff. The local community absorbs the land use, the power draw, and the water use, but gets little back.
This matters now because the geography of new projects is moving sharply rural. Pew Research found in April 2026 that 67% of all planned U.S. data centers are heading to rural areas, compared to just 13% of existing ones. Land is cheaper, there is room to expand, and power infrastructure can still be built. The economics of site selection make perfect sense for the companies involved. They make less sense for the towns receiving them.
Rural communities also have less capacity to negotiate. Smaller tax bases mean fewer lawyers, fewer officials with deal experience, and less ability to push back on the terms developers put forward. Research from the Daily Yonder found that smaller populations often leave rural communities with fewer resources to negotiate deals or absorb the fallout if a facility ever closes.
The electricity question adds another layer. The research in the source article estimates that retail electricity prices rise by about 5% after a data center opens nearby. That estimate is conservative compared to some others. The Independent Market Monitor for PJM, the grid operator covering 13 states including much of the mid-Atlantic region, attributed 63% of a record capacity price increase to data center demand growth, representing $9.3 billion in added costs for 2025-2026. Americans paid nearly 10% more for electricity on average in 2025 than in 2024. The causal link between data centers and any individual bill is genuinely complex, but the direction is clear: more demand, more infrastructure spending, and the costs flow through to whoever is on the local grid.
States gave away an enormous amount in tax revenue to attract these facilities. Virginia is losing close to $2 billion a year in combined state and local tax revenue from its data center exemptions. Georgia raised its projected cost estimate by 664% to $2.5 billion for 2026. Ohio lost $1.6 billion to its data center tax exemption in 2025 alone and the governor then paused the program for new applicants. Indiana extended an estimated $8.2 billion in incentives tied to a single company, Amazon. The subsidies were designed for a different era and were never built with caps or accountability mechanisms.
The political response is now intense. As of the end of June 2026, 116 municipalities had imposed local moratoriums on new data center construction. New York's legislature passed a one-year statewide moratorium on permits for facilities drawing 20 megawatts or more, which now awaits the governor's signature. In the first quarter of 2026 alone, local opposition blocked or delayed 75 projects worth $130 billion, the highest quarterly toll on record.
For any business operator or local official looking at a data center proposal landing in their region, the research is pointing in a clear direction. The headline investment figure from the developer's press release tells you almost nothing. The questions that actually determine community outcomes are: what are the terms of the tax deal, who pays for the grid upgrades, what happens to electricity tariffs, and whether any new tax revenue is actually directed to public services. In a city with an existing economic base, a data center can be a genuine boost. In a rural town, the deal structure is the only thing standing between a real gain and a very large facility that drains public resources for decades.