Plans To Extend US Telephone Tax Anger Representatives

by Glen Shapiro, LawAndTax-News.com, New York

11 February 2005

In a letter sent on Tuesday to George Yin, the head of the Joint Committee on Taxation, sixteen members of the US Congress protested the proposed extension of a tax that is more than a century old, to cover all data communications services.

In a report published late last month entitled 'Options To Improve Tax Compliance And Reform Tax Expenditures', the Joint Committee put forward a proposal which would extend the 3% excise tax on telephone calls (initially introduced in 1898 at a rate of 1 cent per call to fund the Spanish-American War) to "all data communications services to end users".

This would cover broadband and dialup services, cable modems, cellular services, Voice over Internet Protocol (VoIP) products, and DSL links.

The letter, which was principally signed by Republican Representatives, but also received the support of John Lewis (D-Ga) and Anna Eshoo (D-Calif), argued that:

"Consumers who now enjoy freedom from regressive taxes on internet access are not tax cheats. Nor are internet users benefiting from a 'loophole' simply because Congress has wisely rejected the transplantation of regressive, discriminatory, 1930s-era telephone taxes into the digital economy."

It went on to add:

"The question demanding an answer now is why any consumers still have to pay a telephone tax created in 1898 to fund the Spanish-American war. Please report back to us on the policy benefits of ending the Federal Excise Tax on Telecommunications."

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