Big things are happening in North Louisiana. What was once acres of quiet farmland in Richland Parish, located amid sparsely populated rural towns, has been turned into a hotbed of construction. When Meta broke ground on its new $10 billion data center project, “Hyperion,” changes were immediate. In a parish (Louisiana’s version of a county) of just over 20,000 people, 5,000 out-of-state construction workers are projected to be working here at the project’s peak. The allure of jobs and economic development may be enticing, but states need to approach data centers with caution.
As flattering as it would be, Meta did not choose my home state of Louisiana as the location of its new mega-project for our great food or Southern charm. Rather, Louisiana gave Meta what it wanted in tax breaks.
Over the span of a few weeks, state legislators rewrote a bill originally for rural broadband sales tax rebates to instead subsidize data center construction. No one knows how much this will cost the state, as Louisiana enacted these data center subsidies in 2024 without producing an official cost estimate. Neither officials nor the public will know the amount of lost revenue until Meta applies for its sales tax rebates in the following years.
What’s happening in Louisiana isn’t unique. With companies like Meta, Google, and OpenAI spending record-breaking amounts on data center construction, state governments are rushing to offer billions of dollars in subsidies, apparently without understanding their full costs.
According to a report by Good Jobs First, at least 10 states are already losing more than $100 million each in revenue a year from these tax breaks—money that could instead be going to early childhood and K-12 education, infrastructure, or other services. Combined with the rapid growth of AI-fueled data center construction, the costs are becoming harder to accurately predict. Texas saw its annual cost estimates grow from $130 million to over $1 billion in the span of 23 months.
Despite these heavy public investments, data centers are creating few permanent jobs. While Meta’s new data center in Louisiana is bringing in thousands of construction jobs, most of those workers will go away once the project is finished. Meta, instead, is only required to create 500 full-time jobs by 2035 to receive the maximum amount of tax breaks. Although this will be one of the largest data centers in the world, the modest target of 500 jobs is not that surprising. Data centers may take up a lot of space, but they are mostly filled with computers and electronic equipment and do not need lots of employees. One analysis finds that even large data centers generally employ less than 150 people. When all is said and done, this leaves states with an extraordinarily high cost per job created.
The costs to residents are not just fiscal. Data centers require immense amounts of electricity to keep themselves running, but states don’t have the existing infrastructure to meet these needs. In Louisiana, Entergy is building three new gas-fired power plants just for Meta’s data center, which is projected to use more than three times the electricity of New Orleans on any given day. This increased capacity comes at a cost, which is spread among all consumers, not just data centers. Some residents in other states have seen their electricity bills double and even triple over the last five years in areas with high data center activity. In places like Richland Parish, where 25 percent of people live below the poverty line, such increases would further impoverish those already struggling to make ends meet.
Data centers threaten the environment as well. Over 50 percent of energy used to power data centers comes from fossil fuels. These centers are already releasing over 100 million tons of carbon and other pollutants into the atmosphere each year. As in Louisiana, these numbers will increase as more fossil fuel power plants are built to meet data centers’ energy demands. Data centers also use enormous amounts of water to keep themselves cool, with some consuming as much water as a small town. With more data centers built each year, water sources will be further strained, decreasing water quality and availability for local residents.
With out-of-control tax breaks, growing consumer costs, and environmental concerns, states need to call a timeout on their data center subsidies. State and local governments should reevaluate if these subsidies are necessary, given that Meta, OpenAI, Amazon, and Google are already some of the richest companies on the planet. States need to put their own residents first to ensure that they’re protected from negative externalities of the data center industry. Otherwise, a race to the bottom, draining revenues and pocketbooks, is inevitable.
