Unfortunately, like so many taxes imposed by Washington, the telephone tax never went away.  Since the 1800's, it has been reinstated, increased, phased out and phased back in again by Congress about 20 times.  Usually, it was increased as a funding source during war time, then reduced.  Today, it is a permanent tax of three percent on telecommunications services.  You may see it on your phone bill under the line marked “FET” or “Federal Tax.”

For me, this is a classic example of bad tax policy.  First, it’s regressive – meaning that it costs lower-income consumers a significantly higher percentage of their income than middle- or higher-income consumers.  Everyone needs a phone, and it takes a disproportionate bite out of low-income families’ budgets.  This tax burden also hits seniors on a fixed income, college students and small businesses particularly hard.

Second, unlike other excise taxes, it’s neither a “sin tax” meant to discourage behavior or one designated for a specific purpose (like the gas tax that goes into the highway trust fund).  Instead, it has simply been a revenue grab by the government that goes into general revenues. 

Third, it does the exact opposite of what Congress should be doing to remove barriers to the Internet and lower the cost of telecommunications.  At a time when our economic growth is increasingly linked to the information technology and e-commerce revolution, we need to keep access costs as low as possible for consumers and businesses alike.

And finally – this tax cut will help everyone.  About 94 percent of households in America have telephones, and every single one of them will get some relief if we repeal the “tax on talking.”

That’s why I recently introduced the Phone Tax Repeal Act.  It’s direct and straightforward – it completely eliminates the federal telephone tax that all of us pay, once and for all, and the effort is gaining support on both sides of the aisle every day.  In this era of significant projected federal surpluses, now is the time to provide this kind of broad-based, sensible tax relief.