Telephone tax is history, long after wars it financed

Associated Press

WASHINGTON — A federal telephone tax originally imposed to finance the Spanish-American War would finally vanish a century after that conflict ended under legislation given final approval Thursday by the Senate.

"The war came to an end. But Washington couldn’t resist holding on to the revenue," said Sen. William Roth, R-Del., chairman of the Senate Finance Committee. "My sincere hope is that this is the beginning of a long and successful trend."

Repeal of the 3 percent excise tax levied on all types of telephone service was included in an unrelated government spending bill sent to President Clinton on a 58-37 Senate vote. The president is expected to sign the bill.

The telephone tax has had a long and tortured history, beginning with its adoption in 1898 to raise money for the war against Spain when telephones were a scarce luxury. It was repealed, adopted again during World War I, repealed again, resurrected during the Depression and finally made permanent in 1990 as a way to help reduce the federal deficit.

Now, with the government enjoying a huge budget surplus, lawmakers eager to portray themselves as technology friendly lined up to support the telephone tax repeal, partly as a way of removing telephone cost barriers to dial-up Internet access for low-income people.

A person who spends $69 a month on local and long-distance calls, the average for residential service according to one consumer survey, pays about $24 a year for this tax. If that person also has a $30 monthly wireless bill, the total tax is about $34 a year.

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