The top Democratic lawmaker on the Senate Finance Committee has floated increasing taxes on data centers, a move critics say could raise costs on services used by practically all Americans.
Sen. Ron Wyden, D-Ore., released a white paper proposal last week calling to end tax incentives for data centers and to impose an ongoing tax on data centers operating in the United States. Critics of Wyden’s proposal argue that the costs of the new tax could ultimately be borne by all Americans by increasing the costs of common services.
"This tax will be paid by anyone who uses the internet. A tax on data centers is a tax on your email, family photos, small business operations, cloud storage, and your Instagram, X, TikTok and Facebook posts," Americans for Tax Reform director of innovation technology James Erwin said. "Senator Wyden is betraying his legacy as a champion of a free and open internet accessible to all."
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Americans for Tax Reform dubbed Wyden’s proposal a "national internet tax."
Wyden’s office did not respond to a request for comment when reached by Fox News Digital on Monday.
Wyden’s white paper acknowledges that there is some difficulty in applying a tax to data centers, given how common such facilities are and how wide their utilization is.
"Generally, a data center is a facility that primarily contains electronic equipment used to process, store, and transmit digital information, and may be free-standing or within a larger structure that uses environmental control equipment to maintain the proper conditions for the operation of electronic equipment," the white paper reads. "This definition alone would be broad, so carveouts would be developed to focus the tax on data centers as commonly understood, rather than trip-wiring ancillary operations into the tax."
To solve this problem, Wyden suggests excluding "internet infrastructure" from his proposed tax, but does not define what that term means or what kinds of facilities it would cover. The paper does, however, suggest that cloud computing, a highly important piece of internet infrastructure used by many industries, would not be exempted under his tax.
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In addition to excluding data centers from many tax incentives, Wyden’s proposal would hit their owners with a "low single-digit" annual tax on gross receipts, not their profits.
Though Wyden cites land use, local power prices and local water use as the concerns that prompted him to propose the new taxes, he also advocates for taxing any data centers that are built in the Earth’s orbit.
"President Trump is cementing American AI dominance over China while ensuring data centers pay for their own power, water and other utilities," White House assistant press secretary Liz Huston told Fox News Digital when asked about the Wyden plan. "The President’s commonsense approach will beat China, harness this technological boom and deliver lower costs and new opportunities for working families and small businesses."
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Wyden’s proposal clashes with President Donald Trump’s push to accelerate artificial intelligence development and expand the infrastructure supporting it. While Wyden seeks to prioritize assistance for workers and communities disrupted by data center construction, the Trump administration emphasizes maintaining economic growth and ensuring the United States retains a technological edge over China.
The two do have common ground in seeking to limit the impact of data center construction on energy and water prices, though the president has a different way of going about that. A White House official told Fox News Digital that the administration has brought together over 200 utilities, data center developers, cooperatives and state leaders into its "Ratepayer Protection Pledge," an initiative uniting different stakeholders to facilitate to creation of more energy sources to keep prices low.
The Oregon senator’s approach, however, is less aggressive than the calls for a total moratorium on data center construction, which Sen. Bernie Sanders, I-Vt., and Rep. Alexandria Ocasio-Cortez, D-N.Y. have advocated for.
