Senate Democrats are escalating their scrutiny of the tax benefits that major technology companies reap from artificial intelligence investments, demanding that four of the largest U.S. firms disclose the deductions they have claimed under the 2025 tax law. The move comes as policymakers debate whether to impose new levies on AI, a discussion that could have ripple effects for investors and financial advisors.
Sen. Elizabeth Warren (D-Mass.), along with Sens. Tina Smith (D-Minn.) and Jeff Merkley (D-Ore.), sent letters on Sunday to the chief executives of Meta Platforms, Amazon, Microsoft, and Alphabet, the parent of Google. The lawmakers asked each company to detail the deductions taken for AI and data center development under the One Big Beautiful Bill Act (OBBBA), and to describe their lobbying efforts before the law's passage.
The senators tied the tax breaks to growing public unease about AI's side effects, from higher utility bills to job displacement. "Republicans in Washington have passed tax subsidies for AI development and AI data centers," they wrote. Recent Pew Research Center data shows that American sentiment toward data centers has soured: 54% of adults now say data centers have a net negative environmental impact, up from 39% in January, while 50% see a negative effect on home energy costs, up from 38%.
How the 2025 tax law cut tech tax bills
The letters argue that much of the companies' AI spending may have been immediately deductible under the law signed by President Donald Trump in July 2025. A key provision made 100% bonus depreciation permanent, allowing firms to write off the full cost of qualifying equipment in the year it is placed in service, rather than over several years.
Meta provides a striking example. According to CNBC, the company paid $2.8 billion in federal income tax in 2025, down from $9.6 billion in 2024, despite earning roughly the same profit in both years. The senators noted that Meta's capital spending reached $72 billion last year, largely on data centers and AI projects, much of which may have been immediately deductible. Warren's letter also cited Politico reporting that corporate tax payments have fallen 25% this year.
Proposals to tax AI take shape
Warren has been a vocal proponent of taxing AI. In a May op-ed for Time, she called for an excise tax on electricity used by data centers, designed so that "the bigger the data center, the more they pay." She also proposed a wealth tax, higher corporate and capital gains rates, and a stronger corporate minimum tax, arguing that the current code incentivizes capital investment over hiring.
Other lawmakers have floated different approaches. The Bipartisan Policy Center, a Washington think tank, has categorized proposals into four groups. Direct levies on AI companies include a plan by Rep. Greg Casar (D-Texas) to tax large developers on the greater of token sales or product revenue, with rates rising as unemployment increases. Sen. Bernie Sanders (I-Vt.) has proposed a one-time stock tax equal to 50% of any company with at least $200 million in annual AI-related gross receipts, with shares going to a new American AI Sovereign Wealth Fund.
Taxes on AI use range from Chicago's 15% tax on cloud computing services to proposed "automation" taxes on AI-driven layoffs. Taxes on inputs include Virginia's tax on electricity consumed by data centers, and Sen. Ron Wyden (D-Ore.) has released a white paper advocating for removing data center incentives and adding a federal excise tax. A fourth group would rely on broader tax changes, such as higher corporate and capital gains rates, tighter limits on interest deductions, and changes to step-up in basis.
The think tank cautioned that every option involves tradeoffs, from defining an AI company to determining who ultimately bears the cost. "No one policy aimed at AI will score an 'A+' on all five measures," the authors wrote, citing a framework that includes simplicity, efficiency, fairness, durability, and revenue potential.
Not all policy experts favor new levies. The Tax Foundation warned last month that proposals targeting data centers could dampen U.S. AI investment. It said a plan by Sen. Mark Warner (D-Va.) to limit bonus depreciation for some data center spending would discourage investment at the margin without raising much long-run revenue. "Doing so would add significant complexity to the tax code and draw arbitrary lines around the types of companies and investments that can fully recover their investment costs," the Tax Foundation said. "It may also drive AI investment overseas, denying US towns and cities the jobs, economic growth, and tax revenue that flow from investment in local communities."
For financial advisors, the debate over AI taxation could affect client portfolios, particularly those with exposure to technology stocks or data center real estate. As Warren's revived PE bill shows, the senator is not shy about targeting tax breaks she sees as favoring the wealthy. Advisors should monitor these legislative developments, as they could influence corporate earnings and investment strategies. The Senate report on child care tax credits highlights how tax policy can have broad economic implications, and AI taxation is no exception.
