“One hundred and two years after the end of the Spanish-American War, the tax on telephones lives on,” said Portman.  “It proves, beyond any doubt, that once a tax is imposed in Washington – even a temporary luxury tax on something that is no longer a luxury – it’s nearly impossible to get rid of it.  I’m glad the House of Representatives took the first step toward repeal the federal phone tax today.”

When it was enacted as part of the Spanish War Act of 1898, this “temporary” tax amounted to a penny on long-distance phone calls costing more than 15 cents. Over the years, the federal phone tax has survived efforts to phase it out and scale it back, and Congress made it a permanent 3% tax on telecommunications services in 1990.  The federal phone tax is regressive, affecting lower-income Americans and people on a fixed income (such as senior citizens) more than other taxpayers.

The Portman-Matsui telephone tax repeal would provide tax relief to 99.1 million American households that have a telephone line.  Additionally, because of the rapid pace of technological change, the difference between traditional telecommunications, the Internet and other technologies is increasingly unclear.  For example, 96% of households with Internet access use telephone lines to go online.  If the federal phone tax remains on the books, it would jeopardize recent efforts to keep the Internet tax-free.

Portman said, “At a time of budget surplus and prosperity, Congress has the opportunity to take a careful look at our tax code and repeal those provision that are outdated or counterproductive – and the 3% federal excise tax on telecommunications is a great place to start.  It’s not only outlived its purpose, it’s a classic example of bad tax policy.”

“The Spanish-American War is over – the 21st Century telecommunications revolution is here – and it’s time to repeal the tax on talking,” said Portman.