Sen. Ron Wyden has proposed ending tax breaks for data centers and imposing a recurring tax on those facilities, and that plan has stirred worry about higher costs for everyday internet services and conflict with the Trump administration’s push to expand AI infrastructure.
Wyden’s white paper takes aim at the incentives that have helped data centers grow, arguing for a new, ongoing levy to capture revenue from these facilities. The move is framed as addressing local impacts like land use, power demand and water consumption, but it would also reshape the economics of digital infrastructure nationwide. Critics say the proposal ignores how deeply connected these centers are to daily life and commerce.
Opponents warn the cost won’t stay with large operators; it will ripple out to consumers and small businesses that rely on cloud services. Americans for Tax Reform labeled the plan a “national internet tax” and warned it could add to prices for services we all use. From a Republican perspective, any tax that raises the cost of basic online tools is a step in the wrong direction.
“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.”
The white paper itself wrestles with definitions and scope, acknowledging the challenge of pinning down what should count as a taxed data center. “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 avoid sweeping up unrelated infrastructure, Wyden proposes excluding “internet infrastructure” from the tax, but he doesn’t clearly define that term or what would qualify. The ambiguity has critics worried that critical pieces of cloud computing and backbone services could still fall through the cracks and be taxed anyway. Real clarity would be needed to ensure essential services—and the companies that depend on them—aren’t penalized unexpectedly.
Wyden’s plan would also target gross receipts rather than profits, applying a “low single-digit” annual tax to revenue generated by data centers. Taxing receipts is blunt: it hits companies even when margins are thin and could discourage investment in new facilities or upgrades. That approach contrasts sharply with policies that focus on growth and competitiveness, particularly in sectors driving AI and broader tech innovation.
“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.”
The White House has emphasized a market-friendly route to growth, bringing utilities, developers and state leaders together under the “Ratepayer Protection Pledge” to expand energy capacity while keeping prices down. That collaborative tack is meant to avoid blunt tax measures and instead solve strains on grids and water supplies through planning and new generation. The Wyden proposal, by contrast, leans on taxation as a corrective rather than coordination and development.
Wyden’s office did not respond to requests for comment, but the bill’s effects are already being debated across the political spectrum. Some progressives have pushed even further, advocating for moratoria on new data center projects, while Republican leaders argue for policies that promote infrastructure and innovation. The stakes are big: policy choices now will shape how affordable and competitive America’s digital backbone is for years to come.
