Washington, D.C. — The Phone Tax Repeal Act (HR 3916), which Rep. Chris Smith cosponsored and voted for, was overwhelmingly approved by the House of Representatives today.  “This is a real tax break that will benefit everyone from the local phone user trying to stay in touch with neighbors to cyber surfers,” said Smith.

 “Specifically, HR 3916 would eliminate the three-percent federal excise tax on local and long distance telecommunications services.”  A one-percent reduction would occur one month after the bill is signed into law.  The second one-percent reduction would take effect on October 1, 2001 and the tax would finally be eliminated on October 1, 2002.

 Referring to the telephone tax which was enacted in 1898 to pay for the Spanish- American War, Smith said “Repeal of this outdated, regressive excise tax is about a century overdue.  It is just one example of a tax that long ago met its stated need, but goes on to fund other unnamed, unknown programs.”  

 At the time of its creation, the three percent federal phone tax was considered a luxury tax because only about 1,300 households had telephones.   The Spanish-American War, which began in April 1898, ended seven months later in December 1898. 

 Smith is also a cosponsor of HR 1234 which would have completely eliminated the federal telephone excise tax 30 days after enactment of the bill.  Smith said that “While I hoped to completely do away with the telephone tax this year, I am pleased we are once and for all finally hanging-up this nuisance tax.”

 Revenues generated from the three percent federal excise tax on telephone service are deposited to the federal treasury.