Congress Proposes to Repeal 3 Percent Excise Tax

A group of House representatives is calling for the end of a telephony excise tax that mostly affects low-income, elderly and rural citizens.

Reps. John Lewis, D-Ga., Jim Ramstad, R-Minn., Rick Boucher, D-Va., and Gary Miller, R-Calif., introduced the Telephone Excise Repeal Act of 2007 on Wednesday.

Telecom companies and associations support the proposal.

Congress imposed the tax in 1898 to help pay for the United States involvement in the Spanish-American War. The war only lasted four months, but the government has charged the 3 percent tax for 109 years.

New rules implemented last August eliminated the tax on many long-distance, wireless and bundled telecommunications services. The other excise tax has remained in effect, mostly affecting disabled subscribers who rent special equipment to use their communications services. Some low-income consumers receiving discounted local telephone services called lifeline, economy or measured services, also are taxed. In fact, any user who buys piecemeal telephone services, rather than bundled packages, likely pays the tax.

The excise tax was a boon to the federal treasury, but now, due to changing consumer habits, the Congressional Budget Office estimates the taxs contribution will fall to only $100,000 by 2017. That would render the tax almost obsolete, Lewis said.

Relieving the tax burden of the struggling working class is the point of this reform, Lewis said. A few dollars can mean bus fare for children to go to school or a little extra food to eat.

USTelecom and Verizon Communications Inc. released statements praising the proposed legislation and pledging to work with Congress to pass the bill.

U.S. House www.house.gov  

USTelecom www.ustelecom.org  

Verizon Communications Inc. www.verizon.com