The Telephone Excise Tax: Revenues, Effects, and Repeal Proposals (CRS Report for Congress)
| Release Date |
Revised Feb. 1, 2001 |
| Report Number |
RS20119 |
| Report Type |
Report |
| Authors |
Louis Alan Talley, Government and Finance Division |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
The federal excise tax on local and long distance telephone service produced substantial revenues even at a tax rate of 3 percent. The Internal Revenue Service reports that the tax reached a new record in collections of $4.9 billion in FY 1998. These taxes go into the general receipts of the U.S. Treasury and are not dedicated to a trust fund or any other special purpose. In the debate over whether the tax should be repealed, interested parties have attributed a number of advantages and disadvantages to the tax. Not only is the tax administratively easy for the federal government to collect, but it also continues to generate large and stable amounts of revenue. Those who favor the tax note that there is no serious evidence that the communications industry has been injured by the past imposition of this tax. Among those opposed to the tax there is broad consensus that this is a regressive tax. They stress that telephone usage should be distinguished from the sumptuary ("sin") excise taxes imposed on items such as alcoholic beverages and tobacco. Opponents argue that the tax base is one which should be left to the states, that without this tax the communications industry would grow more rapidly, and that the economy would benefit from this expansion.
