A version of the following commentary appeared in the Columbia Missourian.
As technology companies try to meet the skyrocketing demand for AI-specialized computing capacity, they are dotting the country with data centers to the dismay of some and the delight of others. As is all too often the case in Missouri, many of these companies are being offered taxpayer-supported subsidies or tax exemptions.
For example, Independence, Missouri, is giving Nebius more than $6 billion in tax breaks over the next 20 years for a “hyper-scale” data center, and Montgomery County has offered Amazon hundreds of millions in tax abatements to build a data center near New Florence. But why would subsidies be needed when it seems like data-center developers have money to burn and are desperate for suitable building locations?
Recent actions of data-center developers suggest that it is not the cost of building and operating those facilities that is the barrier; the main problems appear to be finding pathways to secure reliable energy generation and getting their centers online smoothly and quickly (speed-to-operation).
These two obstacles are so serious that the major technology companies (Amazon, Google, Meta, Microsoft, etc.) recently met with President Trump and signed the “Ratepayer Protection Pledge” to supply and pay for their own power for their AI data centers.
Why would these companies agree to take on this expense? Because their constraint is not cash. For these firms, time is money. The costs of delays in permitting and interconnection outweigh the value of a local tax incentive.
The negative effects of economic development subsidies and tax breaks are well known. When local officials offer these incentives, they diminish positive benefits that could come from a new data-center development: increased property-tax revenue to fill in the gaps for local services or be used to lower the overall tax rate of the community.
With all of this in mind, rather than just doing what most other states do (handing out checks or tax exemptions) Missouri should work on policies that actually deliver what these companies need most: pathways to secure and reliable energy generation, regulatory certainty, and speed-to-operation.
For local communities, this means they should not offer taxpayer dollars. Even with big tech agreeing to pay for their own power, many municipalities will still try to lure projects with incentives. No doubt the companies will take whatever money is offered to them, but subsidies are unlikely to significantly drive their decisions about where to locate.
Instead, local communities should offer a stable, predictable permitting environment and a suitable location to build. That would help address the greater desire for certainty and speed-to-operation.
And at the state level we should think even bigger. Policies like consumer-regulated electricity (CRE) could help make Missouri a true hub for data center development—without using unnecessary subsidies.
CRE would enable private electricity providers to serve large, energy-intensive customers independent of the existing, permission-heavy grid structure by allowing them to build their own power plants. Rather than spreading the costs for this infrastructure, CRE would create a “parallel path to energy abundance” —one financed by the large customers who demand the power.
CRE would allow these data centers to work with a private partner to meet their own energy needs, with less red tape, more certainty, more control, and more freedom to innovate. These benefits are likely to be more appealing than subsidies.
Unfortunately, offering subsidies seems to be a reflexive reaction in Missouri when there is an opportunity to attract a new business. But especially in this case, Missouri would be better off focusing on what the data center sector really needs. Efficient regulatory and permitting policies (like CRE), a predictable and stable environment in which to construct, and abundant energy would be far better suited to attracting and improving data center development than taxpayer dollars.
