Lawmakers work to erase federal excise tax on wireless

A bipartisan group of House lawmakers introduce legislation to kill the 3-percent federal excise tax on wireless and wireline phone service.
The Department of Treasury, following a series of legal defeats, announced last May it would cease collecting the tax and that consumers would be entitled to refunds this year. New tax rules halting the collection of the tax on long distance, wireless and bundled telecom services actually kicked in last August. Mobile phone carriers and their national trade group, CTIA, lobbied aggressively to convince the Bush administration to stop collecting the tax.
But the tax law, enacted by Congress in 1898 to help fund the Spanish American War, still remains on the books. Moreover, there’s a catch: Disabled Americans and others continue to pay the tax because they may need to rent specialized equipment in order to use telephone services. Rental equipment is still taxed under current law.
“Relieving the tax burden of the struggling working class is the point of this reform,” said Rep. John Lewis (D-Ga.), primary sponsor of the bill. “A few dollars can mean bus fare for children to go to school or a little extra food to eat. If we offer relief to the richest among us, we also need to find ways to unburden those who need it most. That is why I wanted to take the lead on this issue. Though the federal deficit has left the hands of Congress tied in many ways to offer direct financial help to the working poor, tax reform can, bit-by-bit, help to keep more income in the hands of those who need it most.”
In his 2008 budget plan, President Bush proposed legislation to end the federal phone tax. A Senate bill has been introduced to do just that. The telecom industry strongly supports repealing the 3-percent federal phone tax.