The National Taxpayers Union (NTU) says Hoosier taxpayers and utility customers can be “victors, not victims” in the AI and data center boom—if state and local officials handle policy correctly.
In a recent conversation on data centers, AI, and tax policy, NTU President Pete Sepp argued that while data centers do use significant electricity and water, they compare favorably to many other industries and can strengthen local tax bases, stabilize utility rates, and support long-term economic growth.
Sepp said data centers currently consume less than 5% of all U.S. electricity, a share that will grow but still remain below other heavy industries. On water, he pointed to agriculture as a far larger user, noting that farming consumes roughly 480 times more water per acre than data centers.
Critics often respond that, unlike crops, “you can’t eat data.” Sepp countered that nearly every sector—including agriculture—depends on data and artificial intelligence for operations, from crop rotation and weather forecasting to marketing and logistics. “You’ve got to have both if you want to eat,” he said, arguing that data infrastructure is now part of the backbone of daily life.
On energy and the grid, Sepp said large “hyperscale” data centers are often willing to pay for long-delayed grid upgrades that utilities have been reluctant to finance for fear of raising residential rates. In some cases, he added, data center developers build their own power sources—such as gas generation or even nuclear—reducing strain on existing systems. He cited federal research suggesting that areas with major new large-scale energy users can see more stable or even lower electric prices because big customers shoulder much of the upgrade cost.
The location debate has been particularly intense in Indianapolis, including on the near east side in neighborhoods like Martindale-Brightwood. Sepp said there is little fundamental difference between urban and rural data centers: both are essentially “warehouses full of servers” attached to power sources. He argued that, compared to stadiums, malls, or large manufacturing plants, data centers often deliver more tax revenue with fewer traffic and service impacts.
On tax incentives, Sepp drew a line between “outright subsidies” and broad, neutral tax policy. He criticized efforts like a proposal in Ohio to selectively limit standard sales tax exemptions for data centers while leaving them in place for other businesses. If a hospital can write off a server for medical records, he said, a data center should be treated the same way.
For Indiana, Sepp pointed to competitive advantages such as relatively moderate and declining income tax rates and more manageable property taxes than in nearby states like Illinois. He argued that consistent, pro-business tax rules that apply to all industries are preferable to one-off “give away the store” deals tied to job counts and investment promises.
On property taxes, Sepp echoed the idea that as the industrial and commercial share of the tax base grows, residential burdens can shrink. He said communities in states like Missouri, Georgia, West Virginia, and Virginia are already seeing property tax bills level off or decline as data centers expand the tax base—though he warned that local officials must resist the temptation to spend new revenue on nonessential projects rather than long-term relief and reserves.
Sepp also highlighted indirect jobs from constant upgrades, maintenance, and equipment replacement, even if on-site employment numbers remain modest.
He warned that blanket bans or moratoria on data centers—now under discussion in some places, including his home county in Maryland—risk driving investment and tax base growth to more welcoming states. By contrast, Virginia’s Loudoun County has embraced data centers and now gets nearly 40% of its tax base from them, allowing for property tax cuts.
Sepp said the national competitive landscape also matters. Policies that slow down U.S. data center development, he argued, ultimately help rivals like China, which continues to build data centers powered by coal.
The NTU has published an issue brief titled “Taxpayers Can Be Victors, Not Victims in the AI Revolution” and additional papers on energy, water, and tax policy at NTU.org.
