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Proposed Data Center Tax Sparks Warning Over Higher Internet and Cloud Costs

Sen. Ron Wyden is proposing new taxes on data centers, setting up a clash with President Donald Trump’s push to rapidly expand artificial intelligence infrastructure across the country. According to Fox News , Wyden…

Andrew PowellAug 12, 20263 min read

Artifical Intelligence Data centers Politics U.S. News

Sen. Ron Wyden is proposing new taxes on Data centers, setting up a clash with President Donald Trump’s push to rapidly expand artificial intelligence infrastructure across the country.

According to Fox News, Wyden, D-Ore., the top Democrat on the Senate Finance Committee, released a white paper calling for an end to tax incentives for Data centers and a new annual tax on their gross receipts.

Critics argue the proposal could reach far beyond the companies that operate the facilities. They warn higher operating costs could be passed along to consumers through internet services, cloud storage and other digital products.

"This tax will be paid by anyone who uses the internet," Americans for Tax Reform director of innovation technology James Erwin said. "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."

The group has labeled Wyden's proposal a "national internet tax."

Wyden's plan would impose a "low single-digit" tax on data center owners based on gross receipts rather than profits. It would also remove several existing tax incentives for the industry.

The proposal acknowledges that defining which facilities would be subject to the tax could be difficult.

Wyden suggests excluding certain "internet infrastructure," though the paper does not clearly define which facilities would qualify for that exemption.

Cloud computing also appears likely to fall under the proposed tax, despite its widespread use by businesses and consumers.

Wyden cited concerns over land use, electricity costs and water consumption in communities where Data centers are built. His proposal would even apply to qualifying Data centers constructed in orbit.

The proposal comes as Trump continues pushing policies designed to expand America's AI capabilities and compete with China.

"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 said.

The Trump administration has instead promoted its "Ratepayer Protection Pledge," bringing together more than 200 utilities, developers, cooperatives and state officials to encourage additional energy production and limit pressure on electricity prices.

Wyden's proposal also differs from calls by Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez for a broader pause on new data center construction.

The debate leaves Democrats divided over how aggressively to regulate an industry that is becoming increasingly important to the country's technology sector, while Republicans continue emphasizing rapid AI development and infrastructure growth.