Democratic leaders and candidates are targeting Republican-backed tax incentives for data centers as an issue for the upcoming midterm elections. House Minority Leader Hakeem Jeffries (D-NY) and other Democrats are pointing to the Opportunity Zone program, which was expanded in the Republican-authored One Big Beautiful Bill Act of 2025. They argue the legislation provided tax breaks that have accelerated the construction of large-scale facilities, contributing to rising utility costs for residents.
The Opportunity Zone program was originally established in 2017 to attract investment to underdeveloped areas by offering capital gains tax breaks. While the program supports projects including housing and manufacturing, Republicans increased incentives for rural developments in their 2025 tax law. Data center developers have since utilized these credits for projects in less-dense areas, a development Republican tax writers noted in 2025 press materials citing the program's potential to boost the "US Heartland."
Republicans and program advocates defend the initiative, stating it was never designed for a single industry and supports diverse local investments like childcare centers. House Ways and Means Chair Jason Smith (R-MO) characterized the Democratic focus as a "huge stretch," noting that the current zones were designated years before the recent data center expansion. However, some Republicans have expressed concern over federal efforts to preempt state regulation. Rep. Thomas Massie (R-KY) described potential federal overrides of local zoning as "dangerous," while Sen. Josh Hawley (R-MO) warned against price increases similar to those seen in Virginia.
The scale of the industry’s reach is significant, with the National Community Reinvestment Coalition reporting that 14 percent of existing data centers and 17 percent of those under construction are located in Opportunity Zones. These zones currently encompass nearly 9,000 designated areas nationwide. The political impact is visible; in New Jersey, Gov. Mikie Sherrill (D) recently signed legislation ending a specific data center tax credit, while candidates in Pennsylvania are using the energy and water impacts of these facilities as a campaign theme.
What happens next depends on several factors. State governors are currently in the process of selecting the next batch of Opportunity Zone locations—a selection process that occurs once every decade—amid reported lobbying from the data center industry. In Congress, Sen. Adam Schiff (D-CA) is drafting legislation to encourage developers to provide their own electricity generation, while President Donald Trump has proposed a "ratepayer protection plan" involving tech companies. The issue remains a focal point for the November midterm elections, as both parties attempt to address voter concerns over utility affordability and local control.