Kjellquist Blog

I guess from an early age everyone hears the overly used refrain that nothing is inevitable but death and taxes. A corollary to this is that once enacted a tax NEVER EVER goes away. It seems the congressional calculator has a + key but the – key is broken. This fact was recently brought into sharper focus for me when I saw a reference to the federal telephone excise tax. Today this single tax is an enormous revenue generator representing over 0.28% of ALL gross federal revenues. But do you know the history of this tax?

The telephone excise tax has been in effect for most years since it was enacted by the War Revenue Act of 1898. Originally designed as a luxury tax imposed on the few fortunate enough to own telephones, it was first used to provide funding for the Spanish-American War effort at the close of the 19th Century. The Act defined the base of the tax and set the rate in a single sentence.

“Every person, firm, or corporation operating any telephone line or lines is required to make, within the first fifteen days of the month, a sworn statement to the collector of the number of messages or conversations transmitted over their lines during the preceding month for which a charge of 15 cents or more was imposed, and for each such message or conversation to pay a tax of .01.”

The initial tax was short-lived, effective from July 1, 1898, to July 1, 1901 ,find appeared as a single line item in the assessments section of the Annual Report of the Commissioner of Internal Revenue. In its earliest years, the telephone excise tax was not a significant source of tax revenue.

Yup, here we are more than 100 years later laboring under a tax designed as temporary war revenue generator. I hope the Bush administration doesn’t get any ideas for funding the budget supplements for the Iraqi war. BTW, thanks to findarticles for the material on the telephone excise tax.