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39,000 Days Later, Telephone Tax Expires

For all the bad things Republicans did today—the Senate’s amnesty bill being one of the biggest flops of President Bush’s presidency—they’re at least still able to do some good when it comes to cutting taxes, even when it’s unintended.

Last week the President signed into law an extension of his tax cuts—handing the GOP some good news at a time when it’s hard to come by. Today, Republicans on Capitol Hill celebrated the Treasury Department’s decision to concede a court case involving the Long-Distance Telephone Excise Tax.

Explains House Majority Whip Roy Blunt (R.-Mo.): "Levied to help fund the Spanish American War in 1898, the telephone excise tax has outlasted two world wars, the Great Depression, and the start of two new centuries, but the federal government continued to needlessly tax basic telephone services. The war lasted only 220 days, yet this tax on talking has finally expired after over 39,000 days."

Senate Majority Leader Bill Frist (R.-Tenn.), who disappointed me and most conservatives with his embrace of the amnesty bill today, offers some key points following Treasury’s announcement:

  • No immediate action is required by taxpayers.
  • Refunds will be a part of 2006 tax returns (filed in 2007).
  • Refund claims will cover all excise tax paid on long-distance service over the last three years, from July 1, 2003, through June 30, 2006 (time allowed given statute of limitations).  Interest will be paid on refunds.
  • The IRS is working on a simplified method for individuals to use to claim a refund on their 2006 tax returns.
  • Refunds will not include tax paid on local telephone service, which was not involved in the litigation.
  • Originally established in 1898 as a “luxury” tax on wealthy Americans who owned telephones, the federal excise tax on telephone calls is not compatible with today’s modern information-age society.

Perhaps not coincidentally, Frist and Sen. Sam Brownback (R.-Kan.)—both considered contenders for the GOP nod in ’08—put out statements this afternoon around the same time they were voting for an amnesty for illegal immigrants. It has me wondering: Were they trying to placate conservatives angry about their immigration vote?

Here’s what Brownback had to say:

“The longevity of the phone surcharge tax, which was instituted over a hundred years ago as a temporary measure to help finance the Spanish American War, goes to show how hard it is for the federal government to wean itself from so-called ‘temporary’ taxes and programs. I applaud the Treasury Department and the Bush Administration for ending the phone tax and for pursuing a pro-growth tax relief strategy.  The deficit is going down because of the strong economic growth stimulated by the Administration’s tax relief policy.”

And Frist added this:

“Today marks the long-overdue end of an obsolete tax that’s incompatible with modern society.  The long-distance telephone excise tax has morphed from a targeted luxury tax into a burden facing nearly every American with a phone.  I’m confident the refunds issued by Treasury will reap benefits throughout the economy, for Tennesseans and taxpayers everywhere.  I support Secretary Snow’s call on Congress to repeal the remaining outdated excise tax on local telephone service.”

Written By

Mr. Bluey, a contributing editor to Human Events, is director of the Center for Media & Public Policy at The Heritage Foundation. He maintains a blog at RobertBluey.com.

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