House Democrats move to strip AI data centers of federal tax breaks

House Democrats are moving to stop data centers from receiving lucrative federal tax breaks as the artificial intelligence (AI) boom accelerates their expansion nationwide.

The moves puts Democrats at odds with President Donald Trump as he makes data center facilities central to his American AI agenda. The administration has sought to accelerate data center development and streamline permitting as the U.S. competes for dominance in the emerging tech industry.

Reps. Kristen McDonald Rivet, D-Mich., and Don Davis, D-N.C., unveiled legislation Wednesday that would block data centers from tapping certain federal investment incentives.

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The incentives in question weren’t created specifically for AI or data centers. But the industry’s massive infrastructure investments can qualify for these substantial tax benefits, which prompted Democrats to push to exclude data centers as concerns grow over electricity demand, water use and local development.

The bill is backed by 21 additional House Democrats, including Ways and Means Committee member Rep. Jimmy Panetta, D-Calif.

“Washington is giving handouts to big tech companies while American families are drowning. I hear that word in my district more than any other,” McDonald Rivet said at a press conference on Wednesday.

“From rising costs, groceries, gas, housing, healthcare, and a lot more. These are backward priorities and they’re perfectly encapsulate everything that is wrong with the way Washington works, serving interests of big corporations and special interests at the expense of working people,” she added.

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Speaking alongside McDonald Rivet outside the Capitol, Rep. Deborah Ross, D-N.C., pointed to concerns over data-center development in her Raleigh-area district, accusing tech companies of buying land without disclosing their plans in a plot to sidestep local input.

“They’ve sought to bypass local citizens’ right to provide input on putting a data center in their towns and cities,” Ross said.

The lawmaker also argued that the industry’s rapid expansion is straining electricity and water resources while developers benefit from federal and state tax incentives.

“It’s Americans struggling to get by, not big tech who need tax breaks,” Ross said.

Rep. Chris Pappas, D-N.H., argued that data-center development is contributing to higher costs for his constituents as the facilities place growing demands on electricity and water supplies.

He also said communities should have more control over where the facilities are built.

“Our cities and towns shouldn’t have these data centers shoved down their throats without any recourse,” Pappas said. “They deserve the right to decide what’s appropriate for their community.”