Frequently Asked Questions

Q. What IS the Tax on Talking?

A. The Tax on Talking was first introduced in 1898 by the federal government to support the nation's effort in the Spanish-American War, before income taxes were levied. At the time there were two million phones in the United States and the tax on talking was a luxury tax on the wealthy. Over the past 100 years, it has generally been increased at times of national mobilization for war (WW I, WW II, Vietnam), or has been reduced or even eliminated during other times. The Tax on Talking was designed as a temporary tax, but it's one of those Washington taxes that resists a natural death.

Today, every person who uses a telephone - or fax, or wireless phone, or computer modem using telephone lines - pays an additional three percent on every phone bill. That's about 188 million wireline phones and another 64 million wireless phones - 252 million phone lines all together. It's an outdated tax that consumers and businesses pay with every phone bill.

Q. Is it a regressive tax?

A. The Tax on Talking is indeed a regressive tax. Many people, especially those who are least privileged, pay a basic fee for local phone service. The three percent tax falls disproportionately on the poor. Why would we tax those who are least able to pay?

Q. Is it really necessary?

A. Our nation is at peace. And the federal government is running a budget surplus for the first time in decades. The Tax on Talking played a role in times of national emergency, but it is unfair for consumers to keep paying every month into the general treasury when the national policy is to encourage telecommunications growth. This is one of those cases of inertia where it's been easier for those in Congress and the Administration to just "leave well enough alone," but unfortunately, all Americans using the telecommunications backbone in the information age pay a high price for that complacency.

Q. Does the revenue raised support telecommunications infrastructure?

A. You might think that when consumers pay their phone bills every month, the portion they pay for the Tax on Talking goes toward something tangible - improved telecommunications to meet the demands of the new economy in the information age, for example. But revenue from the Tax on Talking is not earmarked - it simply goes into the general treasury.

Q. Other excise taxes are in place to modify behaviors; what does the Tax on Talking seek to change?

A. The Tax on Talking is one of a class of excise taxes, which usually are designed to change behaviors - like excise taxes on alcohol, tobacco, and fossil fuels. Those taxes act to discourage people from using those products. The Tax on Talking also acts to discourage people -- from using the phone. What is the societal benefit to that? For example, the largest calling day of the year is on Mother's Day. The Tax on Talking actually discourages people from calling their mothers!

Q. Is this "easy money" for the Congress and the Administration?

A. Throughout its 100-year history, the Tax on Talking has been increased, lowered, and at times eliminated. Ten years ago, there was a movement in Congress to eliminate the Tax, because they recognized it as regressive and as hurting the poor. But then, when the budget was in deficit, the Administration argued successfully that the Tax on Talking should be kept to help offset growing deficits. The Tax remained in place and like climbing Mt. Everest has been justified primarily "because it's there."

Q. Where is the public outcry about the Tax on Talking?

A. There is indeed a public outcry about this regressive tax. Thousands of Americans have already written to their representatives in Congress, asking that the Tax on Talking be repealed. Phone companies hear complaints all the time form people trying to make heads-or-tails out of the taxes they pay on their phone bills, and who can blame them? It is "death by a million nicks." A tax for universal service, another tax for public access, fees for 911 services, and the Tax on Talking - they all add up, adding an additional 20 to 30 percent on top of every monthly phone bill.

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