North Carolina Governor Josh Stein is pushing lawmakers to cut or eliminate special tax breaks for data centers, warning that the state could lose billions in revenue while residents face higher electricity bills. The governor estimates the state currently loses about $50 million annually through data center tax exemptions, a figure that could skyrocket to $2.3 billion in one-time exemptions plus $450 million annually if all proposed data centers are built .

Why Are Data Centers Driving Up Electricity Bills?

The explosive growth of artificial intelligence (AI) infrastructure has triggered a data center construction boom across the country. A single 300-megawatt data center consumes as much electricity as roughly 200,000 North Carolina homes running continuously, according to U.S. Energy Information Administration data . To put that in perspective, the Raleigh-Cary metro area has only 219,000 households total.

Stein argues that these massive power demands are partially responsible for rising energy prices across the state. He questioned the logic of subsidizing the companies driving those increases while ordinary residents bear the cost.

"Do we really want to subsidize data centers' consumption of energy and electricity, when they make everyone else's power bills go up? It doesn't make much sense to me," said Gov. Josh Stein.

Gov. Josh Stein, Governor of North Carolina

The governor's position reflects growing public concern about data center expansion. An April poll from Elon University found that just 24% of North Carolinians approve of building a data center in their community .

What Tax Breaks Are Currently Available to Data Centers?

North Carolina created special tax exemptions for data centers two decades ago, long before the AI boom transformed the industry. These breaks allow companies to avoid taxes on energy purchases and new equipment. The actual amounts claimed by companies remain secret, but Stein's Department of Commerce analysts used public data to estimate the true cost to taxpayers .

The tax incentives were originally designed to attract business investment when data centers were a smaller industry. Today, however, the world's wealthiest technology companies are driving the data center arms race. Stein questioned why the state should subsidize corporations like NVIDIA, Microsoft, Google, Amazon, and Meta, which have trillions of dollars in capital flowing into data center construction .

How Could North Carolina Reduce Data Center Tax Breaks?

• Full Elimination: Completely repeal the tax exemptions that allow data centers to avoid taxes on energy and equipment purchases, bringing them in line with other industries.
• Partial Reduction: Scale back the exemptions rather than eliminate them entirely, allowing the state to capture some revenue while remaining competitive for future data center projects.
• Conditional Incentives: Tie remaining tax breaks to specific requirements, such as commitments to renewable energy use, water conservation, or local job creation targets.
• Revenue Reallocation: Use recovered tax revenue to fund state services without raising income taxes, which Republican lawmakers have prioritized cutting in recent years.

Stein presented his proposal to a bipartisan Energy Policy Task Force composed of state lawmakers and experts in business, energy, and the environment. He emphasized that reducing tax breaks doesn't mean driving data centers away from North Carolina .

"Given the trillions of dollars of capital that is flowing freely into data center construction, they simply do not need economic incentives to occur. The market is already delivering the incentives," stated Gov. Stein.

Gov. Stein, Governor of North Carolina

Will Republican Lawmakers Support This Plan?

The proposal faces an uncertain path in the Republican-controlled state legislature, which would need to vote to repeal or rewrite the tax exemption laws. However, Stein found an unexpected ally in President Donald Trump, who has also called for consumer protections related to data center expansion .

Some lawmakers appear open to the idea. State Senator Julie Mayfield, a Democrat from Buncombe County, noted that the legislature has recently eliminated other tax credits and loopholes, particularly in the clean energy sector, setting a precedent for Stein's proposal .

"The General Assembly has, over the last several years, eliminated a number of exemptions and incentives in the energy world, primarily in the clean energy world. So call it fairness, call it consistency, call it whatever you want. I do think we should put this on the table for consideration," noted Sen. Julie Mayfield.

Sen. Julie Mayfield, D-Buncombe, North Carolina State Senate

Rep. Kyle Hall, a Republican from Stokes County who chairs the House Energy Committee, expressed uncertainty about how the proposal would be received by his colleagues in the legislature .

What Makes North Carolina Attractive to Data Center Companies?

Despite Stein's push to eliminate tax breaks, North Carolina remains an appealing location for data center development. The state offers favorable weather conditions, abundant and relatively affordable land, and existing state and local incentives beyond the tax exemptions . These natural advantages mean that companies may continue building data centers even without special tax treatment.

However, data center developers are increasingly facing resistance from local communities. In Person County, clean-water advocates have raised concerns about Microsoft's plans for a new data center, though the company has promised to minimize water use and replenish what it consumes . This pattern of local opposition suggests that the debate over data center expansion extends beyond tax policy to broader environmental and quality-of-life concerns.

Microsoft's own leadership has acknowledged the need for industry to bear the full costs of data center infrastructure. Microsoft President Brad Smith has been meeting with federal lawmakers to explore ways for the tech industry, rather than taxpayers, to fund the massive infrastructure required for AI development .