Data center construction has exploded as AI proliferates, and investment has poured in. But members of the public have increasingly aired out fears about land usage, questions about how data centers affect electricity bills, and worries about their environmental impact.

“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,” Wyden said. “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.”

The white paper highlights two possible revenue streams from the data center buildout.

The first is removing existing investment incentives in the tax code that can be applied to data centers, and the second is the creation of a “data center public investment excise tax” that would apply to new data centers.

The Wyden white paper emphasizes that hyperscaler spending on data centers is expected to be roughly $700 billion, “with no end in sight.” For reference, that is more than Argentina’s entire GDP.

The white paper also stresses the concerns about data centers that many voters have.

“Houses go unbuilt as data center developers scoop up land near major markets,” the paper reads. “Redevelopment and new manufacturing projects stall as data centers monopolize investment dollars and the time of skilled labor. Data centers are rapidly popping up in already water-stressed regions that will struggle with the new demand and disrupting local communities with persistent noise pollution.”

In the first part of the proposal, Wyden wants to remove existing tax incentives for constructing data centers, for instance, making it so that assets purchased for data centers are not immediately eligible for write-off. Many capital expenditures can be immediately deducted from taxable income under the One Big Beautiful Bill Act.

The other half of Wyden’s proposal would be the excise tax, which the paper indicates would generate revenue designed to “support workers and communities nationwide.”

The tax would be a gross receipts tax on data center operators, which the white paper says would be at a low single-digit rate “and include mechanisms to properly target the tax and prevent avoidance.”

The white paper notes that the data center boom began in earnest by the end of 2023, so assets from before the start of 2024 will be less affected by the new tax.

“For all but the largest actors, the share of assets in a data center that represent pre-2024 assets (using unadjusted basis) will be exempted from the tax,” the paper reads. “For example, if a data center included $1 million of assets placed in service in 2023, and $4 million of assets placed in service in 2025, then the tax would be reduced by 20 percent.”

Wyden’s white paper contends that the new tax burden will not stop data center development or put at risk the United States’s being the global leader in AI and related technologies.

AS DATA CENTERS SPROUT ACROSS THE US, GUBERNATORIAL HOPEFULS LOOK TO EASE VOTER FEARS

“Rather, they will ensure we have the resources to help the communities and workers most impacted as data center construction continues,” it reads.

The document also specifies that the tax would apply to any data centers located in space. SpaceX CEO Elon Musk and Amazon CEO Jeff Bezos have proposed orbital data centers.