June 9, 2006

Federal Government
Hangs up on the Tele Tax

COLUMBUS, OH – Congresswoman Deborah Pryce (R-Upper Arlington) today submitted the following editorial:

Ronald Reagan once said, “No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear.” Perhaps no program is more illustrative of this point than the federal excise tax on long-distance telephone service.

A small chronology of events may be in order. In 1885, Alexander Graham Bell transmitted the first voice over a telephone line, and thirteen years later, the federal government slapped it with a 3% luxury tax as a temporary funding tool for the Spanish-American War. On December 10, 1898, the Treaty of Paris was signed, formalizing America’s victory over Spain. Since then, we have won two world wars, traveled to the moon and back, and have seen 18 presidents, and 54 Congresses come and go. And all the while, this “temporary” tax has crept into its third century of existence.

I am proud to announce that 108 years after Teddy Roosevelt and the Rough Riders stormed San Jaun Hill, the long distance telephone tax will end.  On May 25, 2006, I joined the Secretary of the U.S. Treasury Department and my colleagues in Congress to announce a resolution to the legal dispute over the federal excise tax on long-distance telephone service.

This action marks the end of an outdated, antiquated tax that has survived a century beyond its original purpose. The U.S. Department of Justice will no longer pursue litigation and the Internal Revenue Service (IRS) will issue refunds of tax on long-distance service for the past three years.   Taxpayers will be able to apply for refunds on their 2006 tax forms, to be filed in 2007.

Effective July 31, 2006, you will no longer see the 3% excise charge on your bill, and when you file their taxes next year, you will get back the past three years of taxes (which is the maximum allowed under the statute of limitations).  The IRS is working on a simplified method for individuals to use to claim a refund on their 2006 tax returns.  The Treasury Department expects that the IRS will be refunding about $15 billion of telephone taxes collected over the last three years.

Because they were not part of the litigation, the taxes paid on local telephone service will remain on your bills, but are now in our crosshairs for elimination, and Secretary Snow has pledged his support for their repeal. These recent developments represent a fundamentally important and growing understanding that t elecommunications are necessities in our daily lives, and its past time that federal, state, and local governments stopped treating them like luxuries.

Long after most Americans have forgotten to “remember the Maine” -- the rallying cry of the Spanish-American War -- we can forget about this lingering tax remnant funding that war. But what we should be careful to not forget is President Reagan’s foreboding warnings about the immortality of taxes; once they are in place, they tend to stick around.