Repeal Tax Subsidies Given to AI Firms and Data Center Speculators

Data centers are incorrectly framed as “economic development” opportunities. The reality is that state and local governments are granting data centers sales and use-tax exemptions, stripping valuable tax money away from communities. This is especially true for public schools, since property taxes remain the largest source of K–12 funding. These subsidies pull valuable tax dollars away from governments and exacerbate municipal budget crises. At the same time, data centers are driving up utility rates, making people’s bills more expensive, and exacerbating an affordability crisis. Federal policymakers can act to ensure that public dollars are not underwriting speculative AI growth while our households and government budgets are subject to increased austerity measures.

Repeal or Roll Back Federal Tax Incentives and Subsidies Given to AI Firms and Data Center Speculators

Repeal or roll back all federal tax subsidies and credits for data center infrastructure, such as the 100 percent bonus depreciation for IT infrastructure and data center equipment under Public Law 119–211 or the 45Q credit for carbon sequestration technologies.2 

Prohibit Corporate Tax Abatements for Data Centers

Federal policymakers can explicitly disqualify data centers from economic development incentives, including sales and use-tax exemptions, corporate income tax credits (investment or job creation), personal income tax diversions, utility tax exemptions, and local property tax abatements or millage preferences, regardless of whether the subsidy is offered through a data-center-specific statute or a general economic development program.3

  1. Public Law 119-21, 119th Cong., 1st sess. (July 4, 2025), 139 Stat. ↩︎
  2. 26 U.S.C. § 45Q (2023). ↩︎
  3. Kasia Tarczynska, “Data Centers: Key Reforms for State Subsidy Legislation,” Good Jobs First, September 23, 2025, https://goodjobsfirst.org/data-centers-best-reforms-for-state-subsidy-legislation. ↩︎