Sen. Ron Wyden’s data center tax proposal is facing sharp criticism after the Oregon Democrat outlined a plan that opponents say could function like a broad internet tax for millions of Americans. Wyden, the top Democrat on the Senate Finance Committee, released a white paper last week calling for an end to tax incentives for data centers and for a new ongoing tax on those facilities operating in the United States.
Critics say the cost would not stop with the companies that own the centers. Americans for Tax Reform director of innovation technology James Erwin said the burden would ultimately fall on ordinary users of online services. He argued that the tax would affect email, family photos, small business operations, cloud storage, and social media posts on platforms including Instagram, X, TikTok and Facebook. The group labeled the proposal a “national internet tax.” Wyden’s office did not respond to a request for comment on Monday.
Wyden’s white paper says data centers are difficult to tax because the facilities are widespread and support a wide range of digital services. The proposal describes a data center as a facility that holds electronic equipment used to process, store and transmit digital information, and says the definition is broad enough that carveouts would be needed to avoid pulling in unrelated operations. To address that problem, Wyden suggests excluding “internet infrastructure” from the tax, though the paper does not define the term or spell out exactly what facilities would qualify. The document also suggests that cloud computing would not be exempt.
The tax would not be tied to profits. Instead, Wyden proposes a “low single-digit” annual levy on gross receipts. In his white paper, he points to land use, local power prices and local water use as reasons for the approach. He also says the tax should apply to data centers built in Earth’s orbit, a sign of how broadly he wants the policy considered as artificial intelligence infrastructure expands.
