Sen. Ron Wyden (D-OR), ranking member of the Senate Finance Committee, on Thursday released a five-page white paper proposing a new excise tax on data centers, including potential levies on facilities in space. The plan outlines two potential revenue streams: removing existing tax incentives for data centers and implementing a public investment excise tax on new facilities.
Meanwhile, Rep. Ro Khanna (D-CA) introduced a resolution titled the 'Data Center Bill of Rights', which would grant local communities expanded authority to block or regulate data center construction. The proposal follows concerns raised by voters about rising utility costs, environmental impact, and land use.
Wyden’s tax proposal
Wyden’s white paper highlights $700 billion in expected hyperscaler spending on data centers, framing the tax as a response to public concerns about economic disruption and environmental impact. The document does not specify tax rates but seeks public feedback to refine the proposal. Wyden stated in the paper that communities are questioning whether the rapid expansion of data centers will benefit them, citing disruptions to local infrastructure and long-term workforce concerns.
The tax plan targets two areas: eliminating existing tax incentives for data centers and establishing a new excise tax on new facilities. The proposal comes amid growing scrutiny of data centers, which are critical to AI development but have faced backlash over electricity consumption and land use.
Khanna’s community rights resolution
Khanna’s resolution would empower local governments to reject data center projects through a transparent process, including the ability to bar facilities within 2,500 feet of homes, schools, or hospitals. The bill also allows states to impose moratoriums on new data centers until protections are in place to prevent rising electricity bills and water depletion.
Khanna, a potential 2028 presidential candidate, cited feedback from Pennsylvania residents who opposed data center construction, particularly in farmland and residential areas. Several states, including New York, have already implemented moratoriums on new data centers.
Industry and policy context
Data center construction has surged alongside AI advancements, with hyperscalers investing heavily in new facilities. Critics argue the facilities strain local resources, while proponents highlight their role in economic growth and technological progress. The competing proposals reflect broader debates over balancing innovation with community concerns and regulatory oversight.