[00:00] Bryan Hyde: Welcome to the Powering America Podcast. I'm Brian Hyde, and today we welcome Pete Sepp, who is president of the National Taxpayers Union. Pete, I know that that title doesn't begin to do justice to what you do. Take a moment, if you would, and tell us just a little bit about who you are and what you do. [00:17] Pete Sepp: Sure. National Taxpayers Union was founded all the way back in 1969 to work for lower, fairer, simpler taxes, less wasteful government spending, sensible regulation, economic freedom at all levels. As president of the organization, I help to develop the strategic plans, also serving as a primary spokesman in addition to several other great folks. And I help to figure out what are the cutting-edge issues that taxpayers are most concerned about going into the future. And we have to stay ahead of that curve because policymakers could do very dangerous, Dumb things if we don't. [01:05] Bryan Hyde: I have to ask you, um, does the involvement of the U.S. taxpayer— does it historically ebb and flow, or, or do we find— is there a consistency in how many taxpayers are really involved in, in keeping track of policy or even helping shape policy? Sometimes it feels like— sometimes it feels like there's not a lot of interest, and sometimes it feels like, wow, people are united on this. [01:29] Pete Sepp: I think that there is a baseline of taxpayer interest and concern in all of government, but it shifts to various areas of government depending upon what's happening. Complexity of the federal income tax system naturally gets a little bigger press and a little bigger public concern around April 15th, or when property tax bills come out largely during the summer in most jurisdictions. People get concerned whether they're getting value for their local government out of those taxes that they pay. This data center issue that we're about to discuss is something that I see has no real way of being predictable as to where it's going to show up or when it's going to show up. It depends largely on local political circumstances. [02:24] Bryan Hyde: With, with that in mind, Let's talk a little bit about data centers, which are, I know, on a lot of people's radar screens. Maybe they're thinking as taxpayers, maybe they're just, you know, they don't know for sure what the data center means. But from a taxpayer's standpoint, what are some of the things we need to keep in mind when it comes to the current issues surrounding the creation and, you know, building and maintaining of data centers? [02:55] Pete Sepp: Well, the very first thing for all of us to understand is that data centers do lots of things. We like to think that, oh, this is where all that AI happens, where some nightmare scenario like The Terminator could come to life. That's really not the case. Data centers are warehouses, way stations, facilitators of all the information that now powers our economy. It is photos that you might keep in an internet account of your family. It's website maintenance for the local grocery store if you want to shop online. It is business traffic that you as a consumer may never see, but is vital to making sure that just-in-time delivery for inventories and whatnot keeps going the way it should. It's also housing computer power that will develop everything from new moon rockets to a new wristwatch. So it's really warehouses for the future, the information economy that includes AI. But there are many, many other things involved in it. And as a taxpayer, you have to understand that this is the future of infrastructure. You know, we think of infrastructure as roads, waterways, bridges, what have you. Data centers are the new infrastructure for the rest of this century. [04:36] Bryan Hyde: So let's talk about where does— where do people get it right and where do people get it wrong concerning what data centers mean, for instance, for their taxes? Are they a net drain on taxpayers or do they provide something of benefit to the taxpayers? [04:57] Pete Sepp: Yeah, they can actually be a net contributor to taxpayers. You know, we've discovered this in our own backyard here where National Taxpayers Union is located in the nation's capital. There's a county called Loudoun County, which is called basically the birthplace of data centers. No other place in the United States has as many data centers per capita as Loudoun County. It's barely 10 miles from where I'm speaking to you now. There in Loudoun County, the contributions of data centers to the local tax base now comprise something on the order of half of the county's budget. They are contributing to most of the new tax-funded programs that support schools or traditional infrastructure like roads. And so there, You are seeing a net benefit from data centers to the local tax base. Contrast that to where I live, Montgomery County, Maryland, also about 10 miles from where I'm speaking to you now. Their county council is banning data centers for a period of 2 to 3 years. They're actually working out those details. Well, I can tell you, Uh, nothing could be more in contrast to Loudoun County in terms of taxes. The county council has voted to take away a universal taxpayer credit against property tax, so every homeowner's taxes just went up by about $700. People will pay even more than that thanks to other tax hikes that the council is passing, primarily because There's no economic growth in the county where I live. And guess what? Data centers provided an opportunity to finally bring that economic growth to the county. And yet the council has gone backward and decided they don't want any of that. So increased taxes without data centers, lower taxes with data centers. That's the bottom line. [07:11] Bryan Hyde: I know there's a lot of misinformation or just misconceptions out there regarding data centers. And, and I'm curious, uh, what, what are some of the more, uh— you mentioned, you know, states that are, that are actually saying, okay, we're going to put a stop or a moratorium on data centers for a while. Are these some of the more extreme responses? I mean, I, first of all, I'd like to see what lines up with the actual reality, but secondly— [07:38] Pete Sepp: Yeah. [07:38] Bryan Hyde: It sounds like a lot of people may be acting on not so good information. and taking, you know, measures that may not be needed. [07:45] Pete Sepp: Yeah, that's right. And where you see it, I think, and this is both a red state and a blue state phenomenon, I don't actually see any ideological bent that says this part of the spectrum hates data centers, this part loves it. It's quite mixed up. But there are misconceptions about policy at a very, very basic level. One of the recent things we did was commission a paper by Jared Walsack, who is a very well-respected tax policy expert at the state level, been doing studies about various issues for years. And what he did was take a look at one area of policy toward business, sales tax exemptions, meaning that if a business buys equipment to make a good or provide a service, well, that equipment is exempt from paying sales tax because it's producing something that will eventually have sales tax charged at the cash register anyway. If you didn't provide that exemption, you would get a cascading or pyramiding effect to the point of something that works like a value-added tax. Consumers could not afford the final product if the initial thing that makes the product is not exempt from sales tax. Well, manufacturing equipment is exempt from sales tax by right in 41 states. The same type of equipment that data centers use to produce their kinds of goods and services— I guess you would call them that. It's information that moves through the system. Well, It's hit or miss out there in the states. There's something over 30 of these sales tax exemptions for data center equipment, but they are coming with all kinds of strings attached. If you're a manufacturer, you make automobiles, for example, and you need a giant conveyor belt. Well, if you buy that from another business, that's exempt by right. You don't have to apply to the government for the exemption. If you're a data center and you wanna buy new server racks to generate and house the information, well, chances are you're going to have to apply for it, and the government may or may not give you the exemption. That is unfair. They are the same types of inputs. They should be treated the same for tax policy. [10:32] Bryan Hyde: Do you see the tide turning anytime soon in terms of the public at the very least, getting a more nuanced view of what these data centers bring? Or is it always going to be a case of, you know, not in my backyard, that, you know, some people are going to push back against, you know, the creation of these kinds of centers? [10:55] Pete Sepp: Well, first I'll say, my county council in Montgomery notwithstanding, yeah, build it in my backyard. I'd really like my property tax relief back. I'm not sure how much longer I can afford to live where I am. But setting that aside, I do think that the more we introduce information like Jared's study into the debate to tell folks, yeah, there are sweetheart deals and subsidies out there for data centers, just like there are for big factories or shopping malls. They are not the norm. And so to have a rational discussion about tax policy toward data centers, energy policy, water policy, all of these things, we have to understand the context of what other industries, what other sectors of the economy get for tax preferences, tax exemptions, what they get for electricity prices and regulations, What they get for water use. If we put those things into perspective, we'll realize largely that data centers are getting the same and or sometimes even worse treatment than other industries. [12:16] Bryan Hyde: Interesting. Yeah, I mean, again, I guess depending on who you talk to, some people are like, oh gee, you know, the data centers are just running roughshod over everybody. But clearly there are ways that that this can be dealt with, that the, you know, keep the taxpayers in mind. You mentioned keeping, keeping water needs in mind. Um, generally speaking, are, are we— I'm talking about the nation as a whole— are we seeing more openness toward, uh, tax reform or tax relief, or is, is that still— is that pretty much a partisan issue? It's going to be this way with one party and You know, the opposite with the other. [12:58] Pete Sepp: At the national level, there is a lot of partisanship. It's very difficult to deny that. Just look at the One Big Beautiful Bill Act last year that passed, and there was no Democratic support at the federal level for that bill. At the state and local level, however, it is more complex. You know, when you're a homeowner, it doesn't necessarily matter who you vote for on the national ticket if you're having trouble affording where you live. And taxes are a big problem with affordability. So I think we're going to see some more honest public debates over things like data centers if we establish the baseline facts. If we say, okay, right now data centers account for maybe 4% of all electricity consumption in the United States headed towards 5%. The other 95% is driven by other types of industries and residents. Water use, same way. Agriculture uses 400, even 500 times more water right now than data centers, depending on the type of data center and what's being planted. You know, those are important facts to remember here, that still, even Even though we see data centers coming up in the news all the time, we see construction of them, and we see a lot of public protests over them, they just don't drive the main part of the energy economy or the water economy, and they're not going to in the future. [14:38] Bryan Hyde: Talk to me about what the National Taxpayers Union is focused on in addition to, you know, the data centers issue. What are some of the top priorities currently before your organization? [14:56] Pete Sepp: Well, here's a bipartisan one at the federal level. We have got to bring government spending back under control. We have seen spending in good times and in bad times in the name of helping to stimulate the economy. Well, it hasn't worked that way. In fact, it's put us even deeper in debt, has been a driver of inflation, which in turn, that arouses calls for more federal spending. We have got to break that cycle. Now, encouragingly, there's another issue we're working on, taxpayer rights when dealing with the IRS. There are all kinds of protections that we have lobbied for over the years. The latest is a package of reforms called the Taxpayer Assistance and Service Act. The Senate Finance Committee recently voted that out with a nearly unanimous consensus among Democrats and Republicans. Stands a good chance of getting enacted before the year is out if we keep up the pressure. [16:01] Bryan Hyde: Very nice. And, and for people who want to take a closer look for themselves at what the National Taxpayers Union is doing, Where can they find your website? [16:11] Pete Sepp: You can visit us at NTU, our initials for National Taxpayers Union, NTU.org. [16:19] Bryan Hyde: Again, we are talking with Pete Sepp. He is president of the National Taxpayers Union. And Pete, I appreciate you taking the time to especially pull back the curtain on, on some of the data center controversies. Thanks again for joining us on the Powering America podcast. [16:35] Pete Sepp: Sure, my pleasure.