Data Center Misinformation is Killing the Golden Goose

The anti-data center rhetoric has reached a fevered pitch. Living adjacent to “data center alley” — the flyers, community meeting invitations, phone calls, and protest notices are frequent.

According to a Politico poll, in the last six months support for data centers has dropped an additional 13 points. In the Commonwealth of Virginia, anti-data center anxiety has taken center stage in local town halls and political campaigns. From Prince William County to the Piedmont, windowless, beige data centers are increasingly being painted as environmental villains that will guzzle local power, threaten water tables, and shatter small-town tranquility.

Yet, as my former colleague at the Cato Institute, Scott Lincicome, demonstrates in his new analysis, “Data Centers Are Not the Problem. Bad Policy Is,” Virginia’s data center panic is built on misplaced blame, half-truths, and outright lies. Far from an economic curse, data centers have given Virginia a generational competitive edge. The real challenge facing the Commonwealth isn’t the physical servers, it is our failure to modernize energy and fiscal policies to keep pace with them.

Over the last two decades, Northern Virginia has become the backbone of the global internet. The local benefits of this arrangement are undeniable but often not fully appreciated.

A comprehensive economic assessment from the Chamber of Progress highlighted that data centers injected over $2 billion in local tax revenues into Northern Virginia in 2024 alone.

In Loudoun County, data center tax receipts have allowed local leaders to slash residential property tax rates. Without this commercial tax base, the average Loudoun homeowner would face an estimated $5,800 increase on their annual tax bill just to maintain existing public schools, emergency services, and county infrastructure.

Across the state, the industry directly and indirectly supports 87,560 jobs and $31.8 billion in regional economic output, creating a high-wage market for Virginia’s skilled trades, electricians, and technicians.

Critics argue that these benefits come at too high a cost, pointing to power grid strain, resource drain, and tax breaks. But a growing body of published academic and economic literature systematically dismantles these doom-loop narratives:

• Electricity Costs and Grid Spreading: Opponents claim data centers drive up utility bills for everyday Virginians. Yet, peer-reviewed grid pricing research reveals that between 2015 and 2024, high-demand data center hubs, specifically those in Virginia, saw retail electricity rates fall or remain suppressed relative to national trends. High, predictable, 24/7 demand from data centers allows utilities to spread fixed grid infrastructure costs across a much larger volume of sold power, driving down unit costs for residential ratepayers. The Jefferson Forum has reported on a similar analysis by the Institute for Energy Research that showed states with higher concentrations of data centers actually have lower energy rates, growing at a slower pace.

• Water Usage in Perspective: Panic over local water supply also crumbles under scrutiny. Data from the Lawrence Berkeley National Laboratory shows that direct water consumption by all U.S. data centers combined accounts for roughly 0.3% of national public water supply. In Virginia, data centers accounted for only 1.4% of total state water consumption in 2025. To put this in context: national golf course irrigation consumes over five times more water than data centers, while agricultural corn and livestock production consume exponentially more — without triggering calls for emergency moratoria. A typical mid-rise office building also consumes more water than your average data center. More importantly, modern Virginia hyperscale facilities now overwhelmingly utilize closed-loop, recirculated cooling systems, thus limiting any impact on local water supplies.

• Sound, Air, and Land-Use Misconceptions: Independent evaluations by policy organizations like the Taxpayers Protection Alliance show that ambient noise and local air pollution fears are often fueled by online misinformation rather than acoustic and environmental data. Compared to heavy manufacturing, chemical plants, or fulfillment distribution hubs, data centers generate virtually no truck traffic, zero wastewater pollution, and minimal ambient noise outside their immediate property buffers. The traffic travelling through data center alley on Loudoun County Parkway has substantially higher noise levels than the data centers themselves. Data centers must, and do, comply with local noise ordinances, and only breach those levels when they are infrequently forced off the grid to use their backup generators because Virginia has failed to build enough energy supply to reliably serve this important sector due to the zero carbon goals of the Virginia Clean Economy Act (VCEA).

• Neutral Taxation, Not “Subsidies”: Finally, critics often label sales tax exemptions on server equipment as corporate handouts, yet tax expert Jared Walczak’s study for the National Taxpayers Union, “Sound Policies, Not Subsidies: Data Center Equipment Tax Exemptions,” exposes this narrative as fundamentally backward. Exempting core machinery and business inputs from retail sales tax is a standard principle designed to avoid “tax pyramiding” — where a service is taxed repeatedly along the production line. In fact, Virginia’s framework treats data centers more strictly than traditional manufacturing or agriculture, forcing operators to meet explicit investment and job-creation thresholds for exemptions that other industries receive automatically. Far from receiving special favors, Virginia data centers are subjected to basic principles of neutral tax policy, and repealing these exemptions would penalize digital infrastructure relative to every other sector in the Commonwealth.

While genuine local friction around data center siting and scenic preservation exists, Virginians should also recognize that there is likely a broader geopolitical force helping fan the flames of regional panic. A ground-breaking investigative series by the Bitcoin Policy Institute and subsequent congressional inquiries have exposed how foreign-aligned funding networks — most notably entities tied to Shanghai-based tech millionaire Neville Roy Singham and progressive dark-money foundations — have actively financed and organized grassroots campaigns to stall U.S. computing infrastructure.

By weaponizing local zoning battles and pushing for sweeping building moratoria, these networks deliberately amplify domestic opposition to handicap American computing dominance in the global AI race against China. When Virginia halts or delays digital infrastructure, the strategic beneficiary isn’t the local homeowner, it is Beijing.

This does not mean Virginia should ignore local impacts. Farmland preservation, transmission line placement, and localized substation siting require careful, transparent municipal planning.

However, outright moratoria, punitive taxation, or anti-development mandates miss the core issue. As Cato’s Lincicome points out, energy strain is a supply-side policy problem. If Dominion Energy or regional grid operators face bottlenecks, the fault lies with slow-moving regulatory frameworks, sluggish transmission line permitting, and energy policies like the VCEA that restrict new generation — not the end-user seeking to purchase power.

Instead of fighting the digital infrastructure that fuels our public schools, keeps local taxes low, and anchors American technological leadership, Virginia leaders should focus on reforming or repealing the VCEA, expedite energy permitting, maintaining neutral tax policies, and if necessary, make on-site power generation easier to build.

Data centers didn’t create Virginia’s policy challenges, in fact, they have created enormous wealth that can fuel Virginia’s economy for decades to come and reduce a myriad of other policy struggles the Commonwealth faces. Data centers have created wealth that did not require the building of massive manufacturing or chemical facilities or other more odious and environmentally risky businesses. Virginia policy makers should think twice before deciding to kill this golden goose.

Key Takeaways:

• Data centers are an economic asset, not a Virginia liability. They generate billions in local tax revenue, support tens of thousands of jobs, reduce pressure on residential property taxes, and strengthen Virginia’s position in the digital economy.
• Many claims about data-center harms are false, exaggerated or lack context. Concerns about water use, noise, air pollution, and electricity costs are often overstated, while the most serious pressures stem from Virginia’s failure to add enough reliable generation and transmission to keep pace with growing demand.
• Virginia should fix bad policy rather than drive away investment. Instead of moratoria, punitive taxes, or restrictions on data-center growth, policymakers should reform the VCEA, accelerate new generation and transmission, preserve neutral tax treatment, and address legitimate siting concerns locally.

Key Quote: “Data centers didn’t create Virginia’s policy challenges; they have created enormous wealth that can fuel Virginia’s economy for decades to come. Virginia policymakers should think twice before deciding to kill this golden goose.”

Derrick Max
Jefferson Forum

Derrick Max is Vice President of Policy at the Jefferson Forum and may be reached at dmax@jeffersonforum.org