Michigan lawmakers take up ‘critically important’ data center debate

A Michigan House oversight committee has waded into Michigan’s data center debate, planning several weeks of hearings on the topic
The attention comes as lawmakers float proposals to rein in the industry, including repealing tax breaks
Proponents say data centers bring progress, while opponents fear pollution and rising energy costs

Amid growing pushback to data center developments across Michigan, a state House oversight committee is zeroing in on the topic as lawmakers rethink policies that have welcomed the industry.

The House Corporate Subsidies and State Investments Committee, which has previously scrutinized subsidies for EV battery plant deals and megasites, will now spend several weeks discussing data centers, said its chair, Republican state Rep. Steve Carra, of Three Rivers.

“It’s critically important for our communities to understand what we’re dealing with here,” Carra said.

The legislative scrutiny comes little more than a year after lawmakers narrowly agreed to exempt large data centers from sales and use taxes in an effort to lure the industry to Michigan. Developers have since floated proposals in no fewer than 16 Michigan communities, securing approval in one so far.

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The development rush has prompted pushback from neighbors and renewed interest from legislators, who are hearing from constituents about the topic.

More than 130 Bridge Michigan readers have mentioned data centers as a top issue in Bridge Listens, an unscientific survey about what Michiganders want 2026 Michigan candidates to address.

“A year ago, this was a topic that many people were not focused on,” said Ben Green, an assistant professor in the School of Information at the University of Michigan, whom lawmakers invited to share policy recommendations on Wednesday.

Now, “we’ve seen organizing and heated debate and lots of resistance in communities across the state.”

Noting that some other data center-heavy states have seen electricity rates rise while the facilities strain the electrical grid and stall the transition off fossil fuels, Green advocated for abolishing Michigan’s data center tax breaks, calling them “bad deals for states and for citizens.”

He also called for strong energy and water use reporting requirements, ratepayer protections from cost increases tied to data centers’ energy needs and statewide limits on the industry’s total water and energy use.

The recommendations come as legislators weigh a host of proposals to rein in the data center industry, from repealing the tax breaks to restraining the industry’s water and energy use or placing a statewide moratorium on its growth.

“It makes no sense for us to give some of the richest companies that have ever existed tax breaks when Americans are struggling to get by,” said state Rep. Dylan Wegela, D-Garden City, a sponsor of legislation to repeal data center tax breaks.

The effort appears to be a long shot. Both Gov. Gretchen Whitmer and House Majority Leader Matt Hall have said they don’t support a moratorium, while Whitmer vowed to veto any bill to end the tax breaks.

“Any legislation that prevents us from growing the economy and creating jobs is an automatic non-starter,” Whitmer spokesperson Stacey LaRouche told a Bridge reporter this week.

The criticisms of tax breaks received pushback from some members of the House committee Wednesday. Reps. Jaime Greene, R-Richmond, and Matthew Bierlein, R-Vassar, both argued that lower taxes help Michigan compete against other states for jobs and investment.

Greene noted that other Michigan industries, such as manufacturing and farming, have long been exempt from sales and use taxes on their equipment.

“Without this, then we would be taxing them multiple times, and we would be becoming noncompetitive,” she said.

At least 19 Michigan communities are seeking to slow the industry’s advance into Michigan by temporarily banning data centers.

Ranging anywhere from three months to a year, the moratoriums give communities time to establish rules governing where, when and how the facilities can be built. But legal experts told Bridge Michigan that local governments would likely face exclusionary zoning lawsuits if they attempted to permanently block data centers.

Still, temporary moratoriums can be a turnoff for data center developers seeking the fastest pathway to construction amid a global race to corner the nascent data center market. Already, developers have withdrawn from several Michigan communities following local resistance.

In a future hearing, Carra said he hopes the committee can hear directly from officials with the big tech companies that are pursuing data center projects in Michigan, including OpenAI, Oracle and Related Digital.

So far, he said, the companies have not responded to invites.

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