Time for a Truce in the Spanish-American War

Published June 1, 2005

One-hundred and seven years ago, the United States went to war with Spain. Because at that time telephones were still a luxury item owned largely by the rich, Congress decided to create a special, 3 percent excise tax on telephone service to finance the war. Although the war ended pretty quickly, the tax endured and, in fact, is still assessed on every American’s phone bill.

At the start of the current century some Democrats and Republicans suggested getting rid of this nineteenth century tax. Because telephone service is an almost universal service today, they saw the tax as primarily harming poor people.

An October 2003 commentary by the Progress and Freedom Foundation noted the Spanish-American War tax prices up to 140,000 low- and moderate-income Americans out of Internet access. The Progress and Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy.

There is no arguing that the heavy load of taxes on phone bills discourages phone and Internet use for people at lower income levels. The Spanish-American War tax costs phone and Internet users about $6 billion per year.

In 2000, both the House and Senate voted overwhelmingly to get rid of the tax. In the House of Representatives, 420 of 435 members voted to end it. Ninety-seven of 100 Senators agreed it was time for the tax to go.

President Bill Clinton promptly vetoed the measure in retaliation against Republicans who opposed another bill he supported.

Five years after Congress overwhelmingly voted to end the Spanish-American War tax on telephones, support is growing for another vote to end the tax. Perhaps this will be the year this pesky and obsolete tax is finally defeated.

Tom Readmond ([email protected]) is a federal affairs manager with Americans for Tax Reform.