“I hope the House will vote to send the phone tax repeal to the President,” said Portman.  “It’s been 102 years since President McKinley signed the ‘temporary’ phone tax into law to help pay the costs of the Spanish-American War.  I hope President Clinton will have the opportunity to declare the Spanish-American War officially over by signing this bill.”

The legislation, which Portman introduced with Rep. Robert Matsui (D-California), repeals a federal telecommunications excise tax that was originally enacted in 1898 as a “temporary luxury tax” to finance the Spanish-American War.  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.

According to Portman, “The Spanish-American War is over, but the tax has lived on for 102 years.  It proves that, once a tax is imposed in Washington, even a ‘temporary tax,’ it’s nearly impossible to get rid of it.  I’m glad the tax on talking is one step closer to entering the history books, where it belongs.”

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, “With our current prosperity and the federal budget surplus, Congress has the opportunity to take a careful look at our tax code and repeal those provision that are outdated or counterproductive.  This tax on talking is a great place to start.  It has outlived its purpose, it’s regressive and it’s a classic example of bad tax policy.”