|
Congressman John Shadegg
The Telephone Tax
What do your monthly phone bill and the Spanish-American War have in
common? The answer may surprise you. In 1898, in order to help pay for the
Spanish-American War, Congress enacted a “temporary” tax that’s still on
your phone bill. It was considered a “luxury tax” at the time, on an item
that few Americans owned – the telephone. It was a penny tax on
long-distance phone calls costing more than 15 cents.
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. 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.
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.
This tax 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.
This is a tax cut that 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.”
Next week the House will vote on H.R. 3916,
the Phone Tax Repeal Act. The bill is direct and straightforward –
it completely eliminates the federal telephone tax that all of us pay --
once and for all. In this era of significant projected federal surpluses,
now is the time to provide this kind of broad-based, sensible tax relief.
<Click here to
return to The Shadegg Source>
|