Michigan passes tax breaks to attract data center jobs
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Lindsey Bailey/Axios
The AI boom is reshaping the Midwest from Michigan to Iowa, driving a wave of data center development, straining energy systems and consuming millions of gallons of water.
Why it matters: Data centers power the AI boom — but their soaring energy and water demands often go unreported, with unclear benefits for local communities and few permanent jobs created.
Driving the news: Gov. Gretchen Whitmer has signed two bills since December granting sales and use tax exemptions for data centers, despite some Democrats' concerns about environmental impacts and corporate giveaways to tech giants like Google and Amazon.
What they're saying: Michigan already has some smaller data centers. They demand less energy than larger centers built in states like Virginia and Arizona, Charlotte Jameson, chief policy officer at the Michigan Environmental Council, told Michigan Public.
- "We are at a really pivotal moment right now in that we don't have any of these large-scale data centers in Michigan yet," Jameson said. "And so we're in a good place to make sure that we are approaching data center development thoughtfully and mitigating any negative impacts that we could see from them."
By the numbers: Data centers used 4.4% of U.S. electricity in 2023 and could consume up to 12% by 2028, per the U.S. Department of Energy.
- Data center construction is at an all-time high, increasing 69% year over year from 2023 to 2024, per CBRE, a commercial real estate firm.
State of play: Columbus, Ohio, and Chicago remain the region's primary data center markets. But companies are increasingly eyeing secondary cities like Minneapolis, Pittsburgh, Des Moines and parts of Indiana, where land is cheaper and energy is more available, says Andy Cvengros of real estate firm JLL.
- Cooler Midwest temperatures and proximity to the Great Lakes reduce the need for energy-intensive cooling — an advantage over warmer, Southern states.
Yes, but: The expansion often happens behind closed doors.
- Local governments frequently sign nondisclosure agreements with tech firms, limiting public knowledge of energy and water use, says Helena Volzer of the nonprofit Alliance for the Great Lakes.
- Not even one-third of data centers track water consumption, according to a 2021 study.
Go deeper: The Midwest's data center boom is heating up