Two wrongs don't make a right on data centers | Opinion
Two wrongs don't make a right on data centers | Opinion
Kenneth Costello, Las Cruces Sun-NewsSat, June 13, 2026 at 9:05 AM UTC
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The country is on the road to build data centers quickly and at enormous scale. AI is a highly critical technology that will shape the future U.S. economy and its place in the world.
In New Mexico, there is an active and growing opposition to data center projects. For one proposed facility, Oracle's Project Jupiter, opponents of the project have raised concerns about electricity consumption and air pollution (especially since it will rely on natural-gas-fired microgrids), scarce water resources for cooling and inadequate public input.
There also is a political undercurrent from the left and the right that raises questions on AI and the need for data centers, if only because they are owned by Silicon Valley billionaires.
Kenneth Costello
We see NIMBYism and corporate welfare at play simultaneously. Each action is misguided by either obstructing the building of new data centers or compelling taxpayers to subsidize them. Let me explain.
NIMBY projects are facilities that increase overall social welfare but inflict net costs (or at least perceived as such) on the citizens living in the host locality. Data centers seem to fall in this category. One problem is that the siting/political process may not mirror a locality's consensus. An active minority of opponents to a facility can dominate the preference of a more passive majority at town meetings or in referenda. This intervention can lead to a decision non- representative of the majority preference in the community.
The risk perceptions of local citizens may be distorted because of faulty information. Better education of citizens can mitigate this problem. While data centers may increase the price of electricity — which is a major concern of policymakers and activists opposed to data centers — this is not a sure outcome.
Corporate welfare (or "crony capitalism") refers to government handouts and special protections granted to certain businesses to locate in a specific jurisdiction. Politicians, whether Democrats or Republicans, have relied on tax breaks to attract new businesses. Several states and locales, including New Mexico, have taxpayer-funded inducements data centers.
Studies have shown that giveaways to businesses most times have little effect on their decision on where to locate. Recipients who receive tax breaks often use their political and economic clout to gain favors at the expense of their competitors and taxpayers. It is a classic example of special interests benefiting at the expense of the general public.
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At first thought, it seems audacious for government officials to expect poor households and small, struggling businesses to apportion some of the taxes they pay to large, profitable businesses headquartered outside their state or locality (like Oracle, Meta, Amazon, Microsoft and Goggle).
While data centers employ many people during construction, relatively few employees the facilities. Their effect on local economic development would appear minor.
Tax breaks open the door to rent-seeking and corruption: Large companies threaten to locate elsewhere unless they receive special treatment and even "bribe" officials with campaign funds in exchange for favoritism.
Real-world experiences have shown the importance of local participation for every aspect of the siting process (for example, economic, safety, environmental). Not only should local individuals or groups have the opportunity to participate, but government and industry should encourage them to do so.
Industry acts as a good citizen when responsive to the concerns of local people over a facility that can, or is perceived to, cause substantial harm. Education and public understanding are critical in subsiding opposition and fear and gaining support for a facility. Frequently, the fears are irrational; but the political reality remains that if the public is wary of a new facility in their locality, the owner will need to address those fears or face strong opposition.
Instead of tax breaks, governments should create a good business climate with reasonable tax rates and regulations, and pro-growth public expenditures like for infrastructure development. States and locales can better satisfy this goal by broad-based tax cuts than by discriminatory and wasteful tax breaks where they play the role of picking winners and losers.
My major message: for data centers the two wrongs of NIMBYism and corporate welfare don't make a right: They drive up the costs of data centers, delay or even terminate their construction, dampen the benefits to the economy from AI and cloud computing, and unfairly burden taxpayers. All of these outcomes will harm society, and for no apparent purpose.
Kenneth Costello is a regulatory economist and independent consultant, residing in Santa Fe.
This article originally appeared on Las Cruces Sun-News: Two wrongs don't make a right on data centers
Source: “AOL Money”
