The Senate delivered welcome news to consumers yesterday when it passed a repeal of the 102-year old Federal Excise Tax on telecommunications. The repeal was contained in H.R. 4516, the appropriations bill for the Treasury Department, Legislative Branch, and General Government Services. The House already passed the bill; it now awaits final signature by the president.
The president should sign the bill. Unfortunately, sources inside the White House have expressed some concern about the excise tax repeal. The president contends that the excise tax revenue is necessary to stem the “digital divide” and wire classrooms to the Internet.
Both contentions are false. The excise tax goes directly into general revenue and does not pay for any specific program. Furthermore, the regressive tax on talking is a contributing factor to what the president terms the “digital divide.” Nenety-four percent of Americans pay this tax and it affects poorer households the most.
It is paradoxical to support a tax that has a disproportionate impact on lower income families, while at the same time claiming the tax can bridge the digital divide
The tax’s regressive nature is ironic, considering it was introduced as a luxury tax on the few Americans who could afforsd a phone in order to help fund Spanish American War. Not only is the Spanish American War over, but so are the days when phones were luxury items. The premise of “digital divide” rhetoric is that Internet access should be universal. Therefore, it is paradoxical to support a tax that has a disproportionate impact on lower income families, while at the same time claiming the tax can bridge the digital divide.
The excise tax has been repealed and re-instituted many times in American history. With today’s greater dependence on telecommunications and data network technology, this would be the perfect time to repeal the tax permanently. The president should sign the repeal and send a message that a new era of tax fairness has begun.