WASHINGTON-The House of Representatives on Thursday overwhelmingly passed a bill to phase out the 3 percent telecommunications excise tax.
“American consumers should no longer be paying for Teddy Roosevelt’s ride up San Juan Hill. Now is the right time to eliminate the 102-year old luxury tax that paid for that effort,” said Thomas Wheeler, president of the Cellular Telecommunications Industry Association. Wheeler first called for the telecommunications excise tax to be repealed in February 1998.
The House bill will phase out the excise tax 1 percent at a time, with the first percent coming off 30 days after final passage and the next decrease occurring on Oct. 1, 2001. The tax will be gone as of Oct. 1, 2002.
“This 102-year old tax on talking penalizes all users of telecommunications services, including Internet users and wireless subscribers … This legislation will free Americans from this antiquated tax that suffocates the growth of technology,” said Tom Tauke, executive vice president for external affairs and corporate communications at Bell Atlantic Corp.
The 420-2 vote in favor of the bill showed its wide bipartisan support. Reps. Pete Stark (D-Calif.) and John Murtha (D-Pa.) opposed the measure but neither spoke during the debate.
The Senate must now consider the bill before it goes to President Clinton for his signature.
The White House indicated it would prefer to have the bill included in an overall budget package rather than as a stand-alone bill because of its cost, said Rep. Louise McIntosh Slaughter (D-N.Y.). The White House estimated that the bill could cost as much as $20 billion over five years.
The telecommunications excise tax was first imposed in 1898 to finance the Spanish-American War. It has been repealed before but it came back to finance world wars I and II and increased to 10 percent during the Vietnam era. The tax was made permanent in 1990.
In 1898, when the tax was first created, there were 1,356 telephones in the United States. Today, there are more than 90 million wireless phones and 94 percent of Americans have wireline service.
“It is a revenue grab. It is not even a sin tax,” said Rep. Rob Portman (R-Ohio), the sponsor of the bill.
Rep. Edolphus Towns (D-N.Y.), who wanted to amend the bill to use the proceeds from the phaseout for digital-divide-closing efforts, said the telecommunications excise tax was unlike other excise taxes because it goes to the general treasury.
“Just as money from the gasoline excise tax should be used for our roads and highway infrastructure, money collected from the telephone excise tax should be used to improve our telecommunications infrastructure.”
The Towns amendment was not even considered because the House rule on consideration of the overall bill prohibited it.
The House debate was not as smooth as many members had expected when Democrats attempted, but failed, to attach a campaign finance reform measure onto the bill.
