Telephone Tax Bill Sent to Clinton

Friday, October 13th 2000, 12:00 am
By: News On 6

WASHINGTON (AP) — A telephone tax that has outlived by a century the Spanish-American War it was created to finance appears finally headed for the history books.

``It's amazing that, 102 years after President McKinley signed the phone tax into law, America's information age consumers are still paying the bills for the Spanish-American War,'' said Rep. Rob Portman, R-Ohio.

Repeal of the 3 percent excise tax levied on all types of telephone service was included in an unrelated government spending bill sent Thursday 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 1898 adoption 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 It was repealed, adopted again during World War I, repealed again, resurrected during the Depression and finally made permanent in 1990 as a way to help reduce the federal deficit.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.

``Because the burden of this tax falls hardest on those who can least afford to pay, like seniors, minorities and small businesses, it makes sense to repeal this tax,'' said Sen. Chuck Robb, D-Va., and 15 other Democratic senators in a letter this week to Clinton.

The measure, which passed the House in May on a 420-2 vote, was also backed by a powerful lobbying coalition that included AT&T and Worldcom, the American Electronics Association, the U.S. Chamber of Commerce and several farm, small business and minority groups.

``This legislation will benefit every consumer, wireless and wireline, by reducing their phone bills every month,'' said Tom Wheeler, president of the Cellular Telecommunications Industry Association.

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 around $34 a year.

Cost to the government of the repeal is estimated at $55.1 billion over 10 years. It is one of several end-of-session tax relief proposals totaling $300 billion over a decade that Republican congressional leaders hope to send Clinton in the next few days.

Other likely items include a package of tax incentives to revitalize impoverished communities, a pension bill expanding 401(k) and IRA contribution limits and several tax breaks for small businesses to offset a plan to raise the $5.15-an-hour minimum wage by $1.


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