Senate Democrats issued a report on 9 October saying state and local tax breaks for data centre construction are costing governments billions in revenue, Bloomberg reported. The report argues that ratepayers, taxpayers and communities bear many of the costs of development while large technology companies receive the benefits. It is an assessment by lawmakers of existing tax breaks, rather than a change to the rules governing them.
Key points
- The Senate Democrats’ report attributes billions in lost state and local revenue to data centre tax breaks.
- Senators Chris Van Hollen and Elizabeth Warren are among the Democrats who issued it.
- In separate letters, Democrats asked four technology companies about deductions related to AI and data centre spending.
Van Hollen and Warren put local costs forward
Senators Chris Van Hollen of Maryland and Elizabeth Warren of Massachusetts are among the Democrats who issued the report, Bloomberg Government reported. Its charge is directed at the companies developing data centres: the report describes them as among the wealthiest in the world and says they are failing to pay their “fair share”. That is the Democrats’ assessment of who benefits from the tax breaks and who pays for the accompanying costs.
The report’s state and local revenue claim concerns tax breaks for building data centres. Its reference to ratepayers brings a different cost into the same argument: what households and businesses pay for electricity. A separate Senate proposal addressed that question by offering states a framework for data centre-related utility costs. The Senate blocked the ratepayer protection bill after four Democrats backed it.
Senator Martin Heinrich of New Mexico blocked quick passage of the measure because he said it did not go far enough to protect consumers, CNBC reported. Republicans had criticised Senate Democrats for blocking legislation that states could choose to adopt. That dispute concerned how to address utility bills, while the new report focuses on revenue governments give up through construction incentives.
Warren seeks deductions under the 2025 tax act
Warren led a related request to the chief executives of Meta, Google, Amazon and Microsoft. Letters sent on 27 September sought details of deductions the companies had claimed for AI and data centre development under the 2025 tax and spending legislation known as the “one big beautiful bill” act. The senators also asked about the companies’ lobbying before its passage. Those questions concern federal deductions, distinct from the state and local incentives examined in the new report.
The letters’ signatories also included Senators Tina Smith, Jeff Merkley, Elissa Slotkin and Richard Blumenthal, alongside Senator Bernie Sanders. The lawmakers argued that Republicans had provided tax subsidies for AI development and data centres. A White House spokesperson, Kush Desai, defended the legislation to CNBC, saying its provisions were driving job, investment and wage growth across industries. The disagreement reaches both the cost of the tax provisions and the economic return claimed for them.
The request to Meta followed a sharp fall in its federal income tax payment: the company paid $2.8 billion in 2025, against $9.6 billion in 2024, while earning roughly the same profit in both years, CNBC reported. In their letter to Meta chief executive Mark Zuckerberg, the senators said the reduction appeared to have been driven in significant part by tax breaks for AI spending. Their wording presents a proposed explanation for the fall, rather than an established account of each deduction Meta took. AI Affairs has also reported on Meta’s use of research credits for AI data centres to reduce its 2025 tax bill.
CBO projected $404 billion in corporate receipts
The Congressional Budget Office projected in February that federal corporate income tax receipts would fall 10.6% in 2026 from the previous year, from $452 billion to $404 billion, CNBC reported. That projection concerns federal receipts across companies. The Democrats’ 9 October report, by contrast, assigns lost revenue to state and local tax breaks for one kind of infrastructure. The two figures describe different public budgets and different tax policies.
The senators’ letters put company-specific figures beside their questions about deductions. They put the fall in Microsoft’s current federal income tax expense from fiscal 2025 to fiscal 2026 at more than $11 billion, and the decrease in Amazon’s federal income tax liability for fiscal 2025 against the preceding year at almost $8 billion, Quartz reported. The lawmakers also said Alphabet’s combined current federal and state income tax expense fell by more than $7 billion over the same period.
Meta, Google, Amazon and Microsoft were asked to respond to the senators’ letters by 12 October, Quartz reported.
