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ELIMINATE THE "TAX ON TALKING"!

Repeal the Federal Excise Tax on Telephone Service

On February 16, 1898 the Federal Government enacted a temporary excise tax on telephone service to fund the Spanish American War. Although the war lasted just under six months, the Federal Excise Tax (FET) created to fund it, is still in effect over 100 years later! Consumers continue to pay this tax on ALL their telephone services -- local, long distance, and wireless.

It is time to eliminate the FET. What was once a temporary luxury tax on the few who owned telephones in 1898 is now an unnecessary burden on virtually every American taxpayer. We need your support to help ax the Federal Excise Tax. Repealing the FET will save consumers over $5 billion annually.

FET Facts

  • $5 Billion in Savings. Repealing the excise tax will save consumers more than $5 billion annually.

  • Proceeds are not earmarked. The FET is a pass through tax that telecom providers collect and give directly to the U.S. Treasury. Proceeds from the FET are not earmarked for specific social spending programs.

  • Savings for Consumers. Telecommunications service providers like AT&T and Bell Atlantic will reap no benefits from the repeal of the excise tax. Repealing the tax puts money in consumers' pockets not the big telephone companies'.

Reasons to Repeal the FET

  • The FET is a Regressive Tax. The FET is a regressive tax because it disproportionately hurts the poor, particularly those households on either fixed or limited incomes.

  • Even the Feds Think the FET is a Bad Idea. A 1987 US Department of Treasury study concluded, "the [FET] causes economic distortions and inequities among households" and "that there is no policy rationale for retaining the communications excise tax."

  • Savings to Consumers. Repeal of the FET will immediately lower consumer phone bills, one of the primary goals of the Telecommunications Act of 1996.

  • Intended as a Temporary Luxury Tax. The FET was intended to be a temporary luxury tax, but has been collected since the Spanish American War. The telephone is no longer a luxury but a necessity for most families. Excise taxes were not intended for essential services.

  • Disproportionately Impacts Rural Customers. The FET disproportionately hurts rural customers because they have higher phone bills on average, due to comparatively more long distance calling.

  • Taxes the Internet. The FET is, in effect, a tax on Internet access for millions of American families. Over 95% of households access the Internet via a phone line. FET is particularly burdensome for those small business and families that have to pay per minute or per call telephone charges when calling their Internet Service Providers. FET also directly affects families and businesses when they purchase a phone line dedicated to Internet access.

  • Tax on Talking. The FET essentially a tax that discourages communications. Although there has been strong opposition to taxing Internet use per minute, this is essentially what FET does for rural dial-up users. This per minute tax will also affect all users that access the Internet via cell phones and many wireless technologies (61.5 million users by 2003 ). There was widespread opposition to imposing a "bit-tax" on the amount of email sent, how is this any different?

  • Decreasing Demand for Internet. The leading reason why households with incomes under $25,000 do not have home Internet access is cost. If consumers are very price sensitive, the government should not create disincentives to accessing the Internet. While many people are advocating spending to solve the "digital divide," eliminating a burdensome tax can accomplish the same task without high levels of government spending.

The Federal Excise tax is a regressive tax that puts an unnecessary burden on Americans. Although this "tax on talking" is labeled an excise tax, it really functions as general revenue tax since virtually all Americans have telephone service. Since over 94 percent of Americans have telephone service, repealing the 3 percent telephone tax will positively impact nearly every household in America.



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