GOP Senator Targets Tax Breaks for Data Centers, Citing 'Corporate Welfare'

Sen. Josh Hawley, R-Mo., intends to introduce legislation that would revoke tax breaks for data centers built within Opportunity Zones, which he criticizes as "corporate welfare" exploited by tech giants. The Opportunity Zone program, established by Republicans in 2017 as part of the Tax Cuts and Jobs Act, was designed to incentivize investment in economically distressed areas.

Hawley stated that data centers have found a way to access these incentives, which he believes are intended for low-income housing and businesses in low-income areas. "These data centers have figured out a way that they think that they can access all of this money," Hawley said in an interview. "So let's be clear, this is a form of corporate welfare. They don't need any welfare. These people are rich, they can pay their own way."

The program designates specific geographic areas as Opportunity Zones, encouraging investment through capital gains tax deferral or elimination. While not explicitly created for data centers, the incentives have become a pathway for tech companies to reduce their tax liabilities on investments in these zones. According to the Department of Housing and Urban Development, there are 8,746 Opportunity Zones across the U.S., with nearly half located in rural areas where data center development is increasing. A report from the National Community Reinvestment Coalition indicated that 14% of existing data centers and over 17% of planned data center projects are situated in these zones.

Hawley's proposed bill would specifically prohibit data centers from qualifying for these tax benefits, aiming to slow their rapid expansion. This move comes amid growing concerns in Congress regarding the implications of unchecked artificial intelligence development, in which data centers play a critical role.

Previously, Senate Majority Leader Chuck Schumer, D-N.Y., convened panels with tech leaders to discuss AI legislation. However, significant legislative action has been slow to materialize. Hawley expressed skepticism about the tech industry's current calls for regulatory self-governance, suggesting that campaign donations may have influenced legislative inaction. "And now what you see the same tech CEOs saying is they want an antitrust exemption so they can all talk together and work together," Hawley commented. "Any regulations, they want to write them themselves. And they're out there saying, 'The sky is falling, the sky is falling. You need to let us get together, write the regulations and figure out what we're going to do.' I'm pretty skeptical of that, I have to say."