One-hundred and two years ago the United States got into a war with Spain. Because telephones were still a luxury item owned largely by the rich at the time, the Congress decided to soak it to the rich and created a special 3 percent excise tax on telephone service that was used to finance the war. Although the war was over pretty quickly, the tax endured and, in fact, is still assessed on every American’s phone bill.
Both Democrats and Republicans had a brilliant idea recently — since we’re no longer at war with the Spanish, why not get rid of the excise tax? Since telephone service is a cheap, almost universal service today, such a plan appealed to even Democrats as the excise tax primarily harms poor people. In fact a study by the Progress and Freedom Foundation claimed that the tax helps price up to 140,000 low and moderate income Americans out of Internet access. I haven’t seen that study and the numbers sound a bit too high, but there is no arguing that the heavy load of taxes in phone bills certainly discourages phone use and Internet use for people in the lower levels of income. The cost of the Spanish War tax alone comes to about $4 billion per year.
Both the Senate and House voted overwhelmingly to get rid of the excise tax. In the House of representatives, 420 members voted to get rid of the tax and in the Senate 97 of 100 Senators agreed it was time for the tax to go. After all there couldn’t possibly be anyone concerned about the Spanish as a military threat could there be?
Of course their could and President Bill Clinton promptly vetoed the measure in retaliation for Republicans opposing another bill that Clinton wants to see passed. That makes a lot of sense — make low income Americans pay more for telephone service because of political disagreements between Clinton and the Congress in the last few months of the Clinton presidency. I guess it’s all about making sure you only benefit the top 1% of politicians rather than average Americans.
Clinton sustains Spanish-American war tax. Press release, Americans for Tax Reform, October 31, 2000.
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