Data Center Construction Fueled by Government Subsidies

 

And Working and Middle Class Communities Will Be Paying for Decades

This piece was first published on Maven’s Notebook on July 2, 2026.

Part 2 of 2 (Part 1)

While most Americans are reeling from massive inflation in the cost of essential goods such as food and gasoline, one group, aided by the intervention of Donald Trump, is benefitting from the chaos—tech bros. Trump, who will go down as the most corrupt president in US history, has gifted  the technology industry a massive windfall through legislation and executive orders designed to free AI tools and the data centers that run them from regulation and oversight.

Passed last year, H.R. 1–119th Congress—sold by Trump as the One Big Beautiful Bill was specifically crafted to accelerate data center construction. The OBBB provides gargantuan tax breaks that slash the upfront capital costs of data center construction, along with lavishing billions of dollars in federal funding and grants to infrastructure projects associated with AI, including data centers and semiconductor fabrication.[1]

Further, the OBBB reinstates a 100% bonus depreciation rule for the property and equipment required for a new data center if the project is up and running before January 1, 2030. This depreciation clause does two things:

First, it allows data center operators to deduct the full cost of the equipment in the year service begins, rather than stretching depreciation over several years as is now required under federal Modified Accelerated Cost Recovery System (MACRS) rules.[2] Second, it supercharges company cash flow by letting operators recover their costs quickly.[3]

Little wonder, then, that tech companies are throwing up the biggest data centers they can as rapidly as possible; from the perspective of AI CEOs, they’re leaving billions of dollars on the table if they don’t get their centers operational by 2030.

Moreover, Trump’s Executive Orders provide additional goodies to data center developers. That includes directing federal agencies to waive enforcement of environmental laws and fast-track data centers on federally controlled land, and ordering the Attorney General to attack states that pass legislation limiting data center development.[4]

Trump’s embrace of fossil fuels also benefits the tech sector by providing additional electricity to sate the massive power demands of these data centers. The burning of high carbon fuels in these Trump-approved plants will drive up energy rates, spike localized pollution in poor and minority neighborhoods, and contribute to climate change, further threatening the health and economic security of future generations. Moreover, the general increase in power demand constitutes a de facto regressive tax, given it drives up energy rates across the board, gravely impacting those least able to afford it.

Worse, ratepayers may find themselves cut off entirely from their power sources, as recently happened in Lake Tahoe. There, Liberty Utilities supplies power to 49,000 customers. The company obtains 75% of its electricity from NV Energy in Nevada, but NV notified Liberty it would have to find a new power provider by May 2027, because the electricity was needed to support the Silver State’s data center boom.[5]

Finally, as noted in an earlier commentary, data centers will greatly exacerbate our water crisis. A single middling-size center can require up to three million gallons of water daily to cool servers; that’s enough to supply up to 25,000 California homes.[6] As data center development expands in California, increasing pressure will be put on our dwindling water supplies. And who will bear the brunt of this burden? Average ratepayers. A recent University of California study confirms that local communities will likely suffer both reduced water access and dizzying hikes in water rates because of data center proliferation.[7]

The tech bros, of course, will continue to enjoy priority access to our water, with prices likely moderated by allies in both Washington and Sacramento—as is the current case for Central Valley corporate growers. And even if subsidies are minimal, it’s not a problem:  they are the tech bros, after all, and—unlike the rest of us—they’re flush with cash.

Clearly, the elitist greed driving data centers knows no bounds, and the speed of their development is alarming. Thankfully, communities across the country are uniting to oppose both the data centers and the destructive, amoral agenda of the technocrats pushing them. Our elected officials should do their jobs and protect the interests of the ordinary people who don’t have the means to purchase influence and—more importantly—voted them into office.

Max Gomberg is a senior policy advisor and board member for the California Water Impact Network and the former Climate and Conservation Manager for the State Water Resources Control Board. He is an expert in state and federal water policy and has focused on equitable policies targeting affordability and cost allocation.

The California Water Impact Network is a state-wide organization that advocates for the equitable and sustainable use of California’s freshwater resources for all Californians.

 
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