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Date Available
9-10-2026
Year of Publication
2026
Document Type
Graduate Capstone Project
Degree Name
Master of Public Financial Management
College
Graduate School
Department/School/Program
Public Administration
Faculty
Ronald Zimmer
Committee Member
Rhonda Trautman
Faculty
Margaret Plattner
Abstract
The United States is currently experiencing an Artificial Intelligence (AI) data center boom due to increased demand for generative AI following the launch of models such as ChatGPT. Data centers, particularly hyperscale data centers, have become a flashpoint due to environmental and public health concerns, along with rising utility costs. Although more than 70% of Americans do not want data centers in their community, state and local governments often offer tax incentives to attract data center development with the aim of job creation and tax revenue.
This study assessed whether the financial benefits that AI data centers may offer state and local governments outweigh the potential costs by analyzing publicly available data related to data center tax abatements and utility costs for four randomly selected states: Georgia, Illinois, Minnesota, and Washington. This study also reviewed enacted and proposed legislation related to AI data centers. Findings include a significant lack of transparency in state and local governments’ tax expenditure reporting. Although the profitability of data centers varied across the states analyzed, all four states have made efforts to reduce or remove tax incentives and abatements for data centers. Utility costs were higher in cities with more data centers. There have been increasing legislative efforts at the local, state, and federal levels to address data center concerns, particularly rising utility costs for ratepayers.
Since AI data centers are relatively new, the current U.S. data center boom highlights the need for future research on potential economic impacts before the construction of additional facilities.
Recommended Citation
Jackson, Shelby, "AI Data Center Boom: An Analysis of Economic and Legislative Impacts" (2026). MPA/MPP/MPFM Capstone Projects. 484.
https://uknowledge.uky.edu/mpampp_etds/484
