Do not negotiate with terrorists. They need to build this datacenter somewhere, so if no city/state yields to their demands they will build it anyway, without any tax breaks.
In practical terms, Google (or Amazon, etc.) wants tax breaks but also wants a desirable community to help recruit and retain talented employees. If a community so impoverishes itself via tax breaks that it can’t afford to remain desirable, then nobody wins. Abuse and wildly perverse incentives are of course possible, but absent those scenarios, there’s an equilibrium between private incentives and public investment that certainly exists.
No? Hence the need for regulations. The free market and competition are not inherently good things. They can be very, very bad for your average citizen.
Google doesn't particularly care about how bad the local community gets there's enough single/childless couples in the work force to provide the minimal local employees a data center will need and when a particular employee's lifestyle changes they can just be move internally and replaced. And if it gets bad enough it's simple enough to build another datacenter.