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News Release May 25, 2000 |
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| Washington, D.C. — Congressman David Phelps (D-IL) today voted in
favor of a bill which eliminates the 3% federal excise tax on
telecommunications services. H.R. 3916, the Telephone Excise Tax
Repeal Act, was approved overwhelmingly by the House of Representatives
and will now move to the Senate for further
action. The first tax on telephone service was enacted in 1898 to help pay for the Spanish-American War. At the time of its creation, when only 1,300 households had telephones, it was considered a luxury tax. Today, roughly 94% of U.S. households have telephone service. The telephone tax rate has changed several times over the years. First applied only to long distance service, it was extended to general phone service in 1941. It is currently a 3% permanent tax on all telecommunications services, including standard and wireless services, as well as computer connections. The revenues from the tax flow directly into the U.S. Treasury, unlike other excise tax revenues, which are earmarked for a specific purpose. H.R. 3916 phases out the 3% tax by 1% each year, until it is eliminated entirely by the end of fiscal year 2002. “After 102 years, it is high time this outdated tax was eliminated,”
said Phelps. “It is pretty hard to argue that basic
telecommunications services are a luxury in this day and age, and I am
pleased that my constituents will no longer be saddled with this extra
cost when they talk to family and friends or conduct business, whether by
phone or computer.” |
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