The excise tax was first applied in 1898 as a "luxury tax" on telephones to help finance the three-month-long Spanish-American war but has remained in place since that time and has clearly outlived its intended purpose, Boucher said.
The effect of the tax, until recently, was to add a 3 percent tax on telecommunications services for all consumers. New tax rules that went into effect in August 2006 repealed the tax on many long distance, wireless and bundled telecommunications services, and taxpayers may claim a credit on their 2006 taxes which reflects the amount they paid for this tax over the last three years.
However, many telephone users who live in rural areas where these services may not be readily available, or users who subscribe only to local telephone service, remain untouched by this relief, Boucher said.
"It is entirely appropriate to permanently repeal the regressive federal excise tax on telecommunications services, which no longer serves its original purpose and disproportionately burdens rural and local telephone subscribers," said Boucher.
Telephone service has become a necessity for all households, and unlike when the tax was initially enacted, the federal excise tax now affects those who can least afford it, Boucher said. Many disabled users still 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.
Some low-income consumers who sign up for discounted local telephone services called lifeline services, economy services or measured services are also still taxed under current law.
"It is abundantly clear that the federal excise tax has long exceeded its intended purpose and now serves only to hinder efforts to ensure the provision of highly efficient and affordable telecommunications service for all Americans. I look forward to working with Congressman Lewis and my colleagues in both the Energy and Commerce Committee and in the full House of Representatives to pass this common-sense legislation," Boucher said.