Inspectel Supports the “Telephone Excise Tax Repeal Act of 2009”
Support Repeal Bills – H.R. 3011 and S. 71/S. 47 - The federal excise tax (FET) on communications disproportionately burdens those who have only local telephone service – most often low-income and rural telephone subscribers. Repeal of this regressive tax will most benefit Americans in need of tax relief.
Why Repeal the Tax
Estimated Cost of Repeal – Lowest in History of Tax. Various court cases have now limited collection of the FET to local communications services. The last estimate for repeal in 2008 was lowered to $1.3 billion over 10 years (JCS-1-08).
Communications Services are No Longer a Luxury – They are a necessity and should not be disproportionately or discriminatorily taxed.
The Time for Repeal is NOW – the FET is a regressive, inequitable, inefficient and difficult to administer tax that Congressional policy makers have repeatedly found to serve no rational policy purpose. Repeal of this tax will put money in the pockets of Americans who most need it.
Bipartisan Support
Senators Charles Schumer (D-NY) and John Ensign (R-NV) have authored repeal bills (S. 71 and S. 47), and Representatives John Lewis (D-GA), Dean Heller (R-NV), Gerry Connolly (D-VA) and Glenn “GT” Thompson (R-CA) joined together in support of FET repeal in introducing H.R. 3011.
Background on Federal Excise Tax on Telecommunications
The FET was first introduced as a “temporary” luxury tax in 1898 to fund the Spanish American War. Unlike other excise taxes that might arguably serve some good by decreasing the consumption of the taxed product (i.e., alcohol and tobacco) there is no such benefit from the FET. Additionally, unlike other excise tax revenues, the FET revenues are not “earmarked” for a specific purpose—they flow into general revenues.
In the year 2000, both the House and the Senate voted to repeal the FET, but the repeal was blocked when the President vetoed the legislation for reasons wholly unrelated to the repeal of the tax.
In May 2006 the IRS conceded five appeals court decisions invalidating the long-distance portion of the FET and issued IRS guidance (IRS Notice 2006-50) that turned off the tax on long-distance and bundled wireless and landline services. In 2007 all tax filers received a tax refund for previously collected long-distance and bundled telephone taxes.
However, the FET is still imposed on “local” communications services at a rate of 3 percent, and it now disproportionately burdens those who have only local telephone service – most often low income, rural and lifeline telephone subscribers.
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