Copyright 2000 eMediaMillWorks, Inc.
(f/k/a Federal
Document Clearing House, Inc.)
Federal Document Clearing House
Congressional Testimony
March 9, 2000, Thursday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 2894 words
HEADLINE:
TESTIMONY March 09, 2000 GROVER NORQUIST PRESIDENT AMERICANS FOR
TAX REFORM HOUSE COMMERCE telecommunications,
trade and consumer protection ITEMIZED PHONE BILLS
BODY:
Prepared Statement of Mr. Grover Norquist
President Americans for Tax Reform March 9, 2000 Executive
Summary Americans for Tax Reform endorses the Truth in
Telephone Billing Act (H.R. 3011), sponsored by Chairman Tom
Bliley (R-VA) and Rep. Billy Tauzin (R-LA). That legislation would require every
telephone bill in the country to indicate clearly exactly what
taxes are being assessed on the consumer's bill. For our
democracy to work, voters must know exactly what taxes they are
paying and under whose authority. In other words, taxes must be
as transparent as possible. Only then can voters decide whether the
taxes are worthwhile and know who to hold accountable.
Taxes buried in the charges for telephone
service or otherwise hidden are consequently subversive of democracy. The
proposed bill would eliminate this problem for telephone taxes.
It would ensure that each taxpayer is given full information regarding the
taxes assessed on his or her telephone bill
each month. Telephone customers would know what they are paying
and why, and then they can take appropriate action at election time. Total
taxes on phone bills are excessive. About 50% of what the
consumer pays in phone bills ends up going to the government in various
taxes. At a minimum, the FCC's e-tax, the
federal excise tax, and Universal Service Charges should be
eliminated, reducing phone bills for average workers by around 25%. Finally, ATR
opposes H.R. 3022, The Rest of the Truth in Telephone Billing
Act of 1999, sponsored by Rep. Ed Markey (D- MA), as it does not make clear that
the government subsidy that some phone users receive are provided at the expense
of other workers. As President of Americans for Tax Reform,(1)
I heartily endorse the Truth in Telephone Billing Act
(H.R.3011), sponsored by Chairman Tom Bliley (R-VA) and Rep. W.J. Billy Tauzin
(R-LA). That legislation would require every telephone bill in
the country to indicate clearly exactly what taxes are being
assessed on the consumer's bill. In particular, the legislation would require
each telephone bill to name each tax assessed
on the bill, the government authority that requires the tax to
be assessed, the dollar amount the consumer must pay for each
tax, and the method of calculating the tax,
whether a flat fee for each line or subscriber, or a percentage of total
charges, or some other basis. For our democracy to work, voters must know
exactly what taxes they are paying and under whose authority.
In other words, taxes must be as transparent as possible. Only
then can voters decide whether the taxes are worthwhile and
know who to hold accountable. Taxes buried in the charges for
telephone service or otherwise hidden are consequently
subversive of democracy. Such taxes abuse working people who
are busy struggling to maintain their homes and raise their families. The
proposed Truth in Telephone Billing Act would eliminate this
problem for telephone taxes. It would ensure that each taxpayer
is given full information regarding the taxes assessed on his
or her telephone bill each month. As a result,
telephone bills would no longer be the confused jumble of
hidden and poorly labeled taxes they are today.
Telephone customers would know what they are paying and why,
and then they can take appropriate action at election time. Among the numerous
fees and assessments on their phone bills voters will learn more about is the
outrageous e-tax. The Federal Communications Commission (FCC)
imposed this tax on phone bills without Congressional
authority. The Telecommunications Act of 1996 gave the FCC authority to set
discounted rates for Internet access and other services to schools and
libraries. But instead of these discounts, the FCC imposed the
e-tax on phone bills across the nation to raise money to
subsidize such Internet services. The tax raises monthly phone
bills by about 5%, imposing a total $2.4 billion annual burden on phone users.
The FCC can only be expected to raise this illegitimate tax
more in the future. The funds raised by the tax are provided to
a government controlled corporation, the Universal Services Administering
Corporation (USAC), which gives grants to schools and libraries to fund Internet
access. It took over 2 years after passage of the 1996 Telecommunications Act
for schools to get any money under this system. A major portion of the funds are
now siphoned off to help finance the USAC bureaucracy dispensing the grants.
This bureaucracy and the e-tax it administers are redundant and
unnecessary, as well as ineffective. Since 1995, Federal funding for education
technology has increased by 2,300%, even apart from the e-tax.
More than 20 distinct federal programs, and countless state and local programs,
help finance upgraded technology to schools and libraries. As a result, 78% of
all schools were connected to the Internet by 1997, with an average of one
computer for every 8 students. In addition to the e-tax, all
Americans today pay a federal telephone excise tax equal to 3%
of their monthly telephone bill. Congress first adopted the
telephone excise tax in 1898 to help finance the
Spanish-American war. The war ended within a year or so. One hundred years
later, the telephone excise tax is still with us. The
tax is an object lesson in how supposedly temporary government
programs and taxes, once adopted, never end. For the
telephone excise tax has been continued for 100 years now on
one temporary excuse after another. The tax was actually phased
out after the Spanish-American War, but was reimposed on long distance calls in
1914, and then fully reinstated to help finance World War I. It was brought back
to bolster government revenues during the Great Depression, and then to help pay
for World War II and the Korean War. In 1966, the tax was
increased from 3% of telephone bills to 10% to help pay for the
Vietnam war. After the war it was phased down to 3%, and then extended
repeatedly in the 1980s to help cover the deficit. Now the deficit is long gone
and the budget is in surplus, but the telephone tax is still
with us. The tax was originally adopted as a luxury
tax on the rich, as only higher income people had phones 100
years ago. Today, the tax is a regressive burden on low income
workers, as it amounts to a much larger share of the meager incomes of the poor
than of the rich. Another lesson: taxes first adopted on the
rich always end up being paid by the middle class, where the real money is.
Often, even the poor end up paying. The telephone excise tax
imposes a total burden on the public of $5-$6 billion per year. It is one part
of the oppressive overall tax burden, which costs the average
family more than food, clothing, and shelter combined. Taxes
overall take 40% of national income, which is far too high. There is no
justification for the telephone excise tax and it should be
repealed, as part of a broader, overall tax reduction program.
Still another phone tax burden results from the Universal
Service Program. Under this program, universal service charges are assessed on
the phone bills of most people so that fees can be reduced below cost for
others. Higher phone bills are charged in particular to lower cost service areas
in the highly concentrated northeastern U.S. and in urban areas. Universal
service charges cost most people more than the 3% telephone excise
tax. These charges amount to a $7 billion per year Federal
tax today, increasing to over $13 billion in 2003. State
required universal service charges add another $17 billion in redistributed
fees, for a total current universal service charge burden of $24 billion today,
rising to over $30 billion in a few years. This tax could grow
even more rapidly in the future if it is used to finance more advanced
telecommunications services over phone lines, such as video services and
Internet access. These universal service charges amount to a huge hidden
tax that often charges poor urban dwellers to subsidize
prosperous rural dwellers. As Stephen Entin of the Institute for Research on the
Economics of Taxation says, "A widow in urban New York City or Boston scraping
by on Social Security pays a federal line fee that helps to subsidize below-cost
phone services to ski chalets in Aspen or Vail." The Universal Service Charges
should be abolished and any necessary subsidies for the poor to pay for phone
service should be provided through the welfare system. This along with
elimination of the telephone excise tax and the
e-tax would reduce most phone bills by around 25%. But these
are not nearly all the taxes that are effectively paid through
the average worker's phone bill. Overall, consumers also pay on their phone
bills state and local sales taxes, a state gross receipts
surcharge, a franchise charge, a charge for Interstate Toll Access, Emergency
911 charges, and a county manhole fee. But that's just for starters. Out of the
remaining amount the consumer pays for phone service, the phone company must pay
federal income taxes, state income taxes,
federal payroll taxes, unemployment insurance
taxes, workmen's compensation taxes, state
franchise taxes, local property taxes, and any
local income taxes. Altogether this means that about 50% of
what the consumer pays in phone bills ends up going to the government in various
taxes. This is excessive overreaching by overly burdensome
government. Finally, I oppose H.R. 3022, The Rest of the Truth in
Telephone Billing Act of 1999, sponsored by Rep. Ed Markey
(D-Mass.), in its current form. That legislation would also require the phone
bill to state any subsidy the phone user receives from any government program
and the amount of such subsidy effectively reducing the phone user's bill. The
problem with this required statement is that it is out-of-context and
effectively misleading. For it does not make clear that the government subsidy
is provided by the phone user at the expense of other workers. Consequently, the
Markey proposal should require that the bill also tell the phone user that any
such subsidy was harnessed by taxes on their neighbors and
other workers. Then voters would be in a position to make a complete judgment on
the issue. 1 Neither Americans for Tax Reform nor the witness,
Grover Norquist, has received and federal grant or subgrant or any federal
contract or subcontract, during the current fiscal year or either of the two
preceding fiscal years.
LOAD-DATE: March 15, 2000,
Wednesday 
