Copyright 2000 The Chronicle Publishing Co.
The San
Francisco Chronicle
MAY 26, 2000, FRIDAY, FINAL EDITION
SECTION: BUSINESS; Pg. B1
LENGTH: 652 words
HEADLINE:
Phone Tax Gets Boot From House
BYLINE: Carolyn
Lochhead, Chronicle Washington Bureau
DATELINE:
Washington
BODY:
The House overwhelmingly approved
the repeal yesterday of a telephone tax originally imposed in
1898 to finance the Spanish-American War.
Repeal of the 3 percent excise
tax, which passed 420 to 2, was high on House Republicans' "eContract 2000"
agenda, which is designed to burnish the GOP's high-tech credentials. It follows
a five-year extension of the Internet tax moratorium that Republicans pushed
through the House two weeks ago.
Repeal proved immensely popular with
Democrats as well, attracting Rep. Bob Matsui, D-Sacramento, as a lead
co-sponsor. The bill now goes to the Senate, where it is sponsored by John
Breaux, D-La., and William Roth, R-Del. The Clinton administration contends that
a repeal would be costly but has not threatened a veto.
The tax, which
costs the average telephone user about $24 a year, was an
irresistible target for House lawmakers. Its age and origin invited ridicule,
and its structure -- a flat charge on telephone use -- was widely assailed as
hitting the poor hardest and contributing to the "digital divide" that inhibits
poor people's access to the Internet.
"At a time when our nation must
find ways to make the information revolution affordable to all Americans,
repealing this regressive tax should be one of our first steps," said Rep. Anna
Eshoo, D-Atherton.
The century-old tax originally was conceived as a
temporary "luxury tax" on a novel product, the telephone, which only the very
wealthy could afford in 1898.
That year, only 1,376 Americans had
phones. The tax now applies to 252 million telephone lines that carry everything
from computer communications and faxes to cellular phone conversations.
The Spanish-American War lasted less than eight months, but the tax has
survived 102 years, generating more and more revenue as telephone use has grown.
The tax was repealed in 1916, then reinstated a year later to help
finance World War I. It was killed again in 1924, then renewed during the
Depression in 1932. It was scheduled to be phased out several times but was
ultimately raised to 3 percent in 1985 and made permanent in 1990.
Rep.
Chris Cox, R-Newport Beach (Orange County), a member of the GOP leadership who
seized on the tax as a ripe target for repeal, called it "unnecessary and unfair
confiscation" yesterday and urged members "to run a bayonet through it and kill
it."
The repeal would be phased in to take full effect in 2002. The
federal government would stand to lose roughly $20 billion over
five years. That makes for a substantial tax cut that would be assailed on
Capitol Hill as fiscally irresponsible in most other circumstances, but it drew
almost no opposition yesterday.
Only East Bay Democrat Pete Stark and
Rep. John Murtha, D-Pa., voted against repeal.
Ever since President
Clinton vetoed a $792 billion, 10-year tax cut that Republicans
passed last year, House GOP leaders have been repackaging its most popular
elements as separate bills that are more difficult for Democrats to oppose.
Unlike most high-tech legislation, repealing the telephone
tax drew scant interest from Silicon Valley. Many lobbyists had not
even heard of the idea when it began surfacing a few months ago. Nor did
telephone companies push for repeal, since they simply pass the tax through to
consumers.
The federal telephone tax is only a small
part of total excise taxes on telephone use, most of which are levied by state
and local governments.
Combined federal, state and local telephone
excise taxes reach as high as one-third of telephone bills in some states. The
combined telephone tax is estimated at 11.3 percent in San
Francisco, 19 percent in Oakland and 16.5 percent in San Jose.
Repeal of
the tax was one of the few items that an Advisory Commission on Electronic
Commerce, set up to make recommendations on Internet taxes, could agree on after
a year and a half of deliberations.
LOAD-DATE: May 26, 2000
