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Bill Would Repeal 107-Year Old Tax on Talking

Telephone tax helped fund Spanish-American War

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Dateline: May 2005

U.S. Rep. Gary Miller (R-California) has introduced a bill to repeal a "temporary" tax on talking enacted 107 years ago.

Miller's bill would repeal the 3% federal excise tax on telecommunications established in 1898 as a means of generating revenue to fund U.S. combat efforts in the Spanish-American War.

While the Spanish-American War tax was originally billed as a temporary luxury tax 1898, when only the wealthiest Americans had phones, the telephone is now an essential part of American life. The tax, says Rep. Miller, is therefore highly regressive, as it represents a greater share of the income of poorer Americans.

In 2000, the House of Representatives passed legislation repealing the Spanish-American War tax by a vote of 420-2, and both houses of Congress passed appropriations legislation including the repeal in the same year. President Bill Clinton, however, vetoed the legislation.

“Repealing the Spanish-American War tax is long overdue,” said Grover Norquist of Americans for Tax Reform in a recent press release. “We’ve been stealing money from telephone users for 107 years to fund a war it took us four months to win. Getting rid of this relic is a major priority of the taxpayer movement.”

The tax has its defenders
In January 2005, Congress' Joint Committee on Taxation issued an opinion that the century-old 3% tax might not only be retained, it could also be extended to apply to new technologies like wireless Internet and data connections.

"Cellular phones are being manufactured that may operate using VoIP through Wi-Fi access, as well as through more traditional means," said the tax committee's report. "As voice phone service migrates to using Internet Protocol, there may be no way to distinguish 'packets' of voice and 'packets' of data."

Was it really meant to be a 'temporary' tax?
In 1898, the House Committee on Ways and Means wrote of the Revenue to Meet War Expenditures Act, which originally enacted the 3% tax that, “all of these additional taxes are war taxes, which would be naturally repealed or modified when the necessitates of war and the payment of war expenses have ceased.”

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