[Infowarrior] - Treasury to Refund $13 Billion Collected on Long-Distance

[Richard Forno]

'Antique' Phone Tax Dropped
Treasury to Refund $13 Billion Collected on Long-Distance
http://www.washingtonpost.com/wp-dyn/content/article/2006/05/25/AR2006052500
720_pf.html

By Albert B. Crenshaw
Washington Post Staff Writer
Friday, May 26, 2006; D02

The Treasury Department, conceding that it has no right to continue
collecting a 108-year-old tax on long-distance telephone calls, announced
yesterday that it will drop its legal battle for the tax and instead refund
some $13 billion to callers who have paid the tax in the past three years.

The 3 percent tax, enacted in 1898 to help pay for the Spanish-American War
and revised in 1965, has been declared illegal by five federal courts of
appeal during the past year as the result of challenges brought by companies
forced to pay it.

Long-distance carriers have been required to bill customers for the tax and
remit it to the government.

Treasury Secretary John W. Snow yesterday called it "an outdated, antiquated
tax that has survived a century beyond its original purpose, and by now
should have been ancient history."

The tax, which was originally considered a luxury tax because only wealthy
people had telephones at the time, will go out of existence on July 31.

"It's a great day for consumers," said Gene Kimmelman, director of the
Washington office of Consumers Union. "The last residue of the
Spanish-American War is finally complete."

The Treasury Department had no figures on how much of a refund an individual
might expect, but Kimmelman said, "People with the biggest phone bills will
be the biggest winners." Those are principally businesses and high-income
consumers who tend to make heavier use of phone services than do
lower-income individuals, he said.

However, he cautioned that many, perhaps most, households will see only a
modest refund -- possibly $10 or so. Over the past several years,
traditional long-distance usage has fallen as cellphones and the Internet
have gained popularity.

Snow said the taxpayers will be able to claim three years' worth of the
telephone tax, the legal limit on claiming tax overpayments, on their 2006
tax returns. The Internal Revenue Service, he said, is working on a
simplified method by which taxpayers can claim their refunds.

It is expected that, as with sales-tax deductions, taxpayers will be allowed
to claim either a standard amount or an exact amount based on their phone
bills. Individuals who are not required to file tax returns will be offered
a special form for the rebate.

"It was an antiquated tax that made no sense whatever," Kimmelman added.
With advances in telephone technology, cellphones and the Internet, he said,
it has become increasingly difficult to determine which party in a call the
tax should be assigned to.

"You can't track it," he said. "That made the levy unsustainable."

The $13 billion in rebates will cost the government more than the estimated
$10 billion that would have been handed out under Senate Majority Leader
Bill Frist's (R-Tenn.) short-lived proposal to give taxpayers $100 apiece to
offset high gasoline prices.

Snow noted that a similar levy on local calling remains in effect, and he
called upon Congress "to terminate the remainder of this antique tax by
repealing the excise tax on local service as well."