Senate Finance Committee Ranking Member, Ron Wyden, D-Ore., released a draft proposal on Aug 6, that would change the federal tax treatment of data centers as technology companies continue to expand infrastructure used to develop and operate artificial intelligence (AI) systems.
According to the United States Senate Committee On Finance press release, the proposal connects data center expansion to broader concerns about the effects of AI adoption on workers as revenue generated by the proposed tax changes should be used to assist workers affected by job losses and other economic changes associated with the wider use of AI.
The proposal, outlined in a white paper, identifies two potential sources of federal revenue. Removing existing tax investment incentives for data centers and creating a new Data Center Public Investment excise tax. The white paper argues that existing investment incentives are unnecessary given the scale of current data center construction. It also proposes an excise tax intended to create a consistent source of revenue tied to data center development.
Wyden said, “American communities are rightfully questioning whether the rapid buildout of data centers across the nation will benefit them, as local disruptions rise and Americans grow concerned about the long-term career prospects of millions of workers.”
He added, “These proposals are a first step towards safeguarding taxpayer dollars and ensuring there are resources to support American workers displaced by the coming disruptions to the economy.”
Data center construction in the U.S. has quadrupled over the past four years and Hyperscalers are expected to spend about US$ 700 billion on data centers this year as companies expand computing capacity for AI and other applications.
Wyden has also raised concerns about the local effects of data center development in April, he pressed major technology companies over their use of local water supplies and appealed companies to adopt closed-loop water systems and reduce consumption, particularly in drought-affected states such as Oregon where potential measures will be implemented to address the impact of data centers on local electricity supplies as energy costs rise in parts of the country.