The leading Democrat on the Senate Finance Committee, Senator Ron Wyden, has proposed increasing taxes on data centers. Critics argue this measure could lead to higher costs for internet services commonly used by Americans.
Wyden, D-Ore., released a proposal suggesting the removal of tax incentives for data centers and introducing a continuous tax on those operating in the U.S. According to opponents, this tax could raise service costs for all Americans, impacting emails, photos, and social media platforms.
“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,” stated James Erwin, director of innovation technology at Americans for Tax Reform. “Senator Wyden is betraying his legacy as a champion of a free and open internet accessible to all.”
Americans for Tax Reform has labeled Wyden’s proposal as a “national internet tax.” There was no response from Wyden’s office regarding requests for comment.
Wyden’s proposal acknowledges the challenges in taxing data centers due to their ubiquity and extensive use. As defined in the proposal, a data center is a facility commonly used to process, store, and transmit digital information, sometimes equipped with environmental control systems.
Wyden suggests excluding “internet infrastructure” from the proposed tax, although this term remains undefined. The document indicates that cloud computing, an essential part of internet infrastructure, would not be exempt.
Aside from removing tax incentives, Wyden’s plan would introduce a “low single-digit” annual tax on data centers’ gross receipts. He mentioned concerns like land use, power prices, and water use as motivations for the new tax, extending it to any space-based data centers as well.
The proposal contrasts with President Donald Trump’s initiative, which focuses on promoting artificial intelligence development and enhancing supportive infrastructure. A White House spokesperson mentioned collaboration with numerous stakeholders to facilitate energy sources, maintaining low prices, and boosting the economy.
Though both Wyden and the Trump administration emphasize limiting data centers’ impact on energy and water prices, they propose different strategies. The administration’s “Ratepayer Protection Pledge” initiative involves over 200 utilities, developers, and state leaders to support energy expansion and cost reduction.
Wyden’s approach is more moderate compared to the moratorium on data center construction advocated by Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez.