Congressman Moves to Repeal E-Rate Phone Tax as Illegal, Unnecessary

Published May 1, 1999

While supportive of the goal of connecting schools and libraries to the Internet, Congressman Tom Tancredo (R-Colorado) has introduced a bill in the U.S. House of Representatives that would terminate the $2 billion a year in backdoor taxes charged to telephone users for that purpose.

According to Tancredo, the tax was never approved by Congress, most schools are already connected to the Internet, and millions of dollars are available to schools through existing federal technology improvement programs. In addition, Tancredo notes, the Department of Education cannot account for the money its currently spends on education technology.

The E-rate was created by the 1996 Telecommunications Act with the goal of connecting schools and libraries to the Internet. It is often referred to as the “Gore-tax,” a reference to Vice President Al Gore’s desire to have all of the nation’s classrooms connected to the Internet by the year 2000. But the E-rate is charged by the Federal Communications Commission as a “mandatory contribution” from telephone companies, not as a “tax” by Congress.

“The tax was never actually imposed by Congress,” explained Tancredo. “The FCC and the Vice President basically imposed it on their own by stretching and misinterpreting 1996 telecommunications reforms.”

The E-rate “contributions” are passed on by telephone companies to their long-distance customers in the form of a “universal service” charge. Tancredo contends this is a backdoor tax on consumers, arguing there is no difference between a mandatory contribution and a tax–except that the tactic of imposing mandatory contributions “cheats the democratic process.” (See “FCC Oversteps Authority on Schools Internet Hookup,” School Reform News, April 1998.)

According to Tancredo, more than 20 federal programs aim at improving technology in U.S. schools and libraries. The federal government spends over a billion dollars a year for educational technology programs. However, those programs are not coordinated, and the U.S. Department of Education cannot account for the money currently spent on educational technology.

Federal funding for education technology is up 2,304 percent since 1995, excluding the E-Rate program. A year before the E-Rate program distributed any funds, a 1997 survey by the U.S. Department of Education revealed that 78 percent of all school were already connected to the Internet.

“All of this makes me question the real intent of the Gore-tax,” said Tancredo. “We have a tax that Congress never passed, supporting goals we already fund, to do something that most local schools have already done. It’s just crazy and we should end it so Americans can keep more of their hard-earned money.”

Tancredo’s proposal, known as the E-Rate Termination Act, would remove the portion of the 1996 reforms that the FCC used to justify the tax. Tancredo’s bill was introduced with 13 cosponsors, including Pete Sessions and Ed Royce, and has been forwarded to the House Committee on Commerce for further study.