The war is over and now, finally, so is the tax that funded it.
But the Spanish-American War was over 108 years ago, and the Treasury Department just announced last week it would no longer try to collect the phone tax Congress passed to pay for it.
The tax was first levied in 1898 on long-distance telephone calls. It was another of Washington’s attempts to hit the rich because they were the only ones who could afford such calls back then.
But since technological advancements have made phones and long-distance calling cheap, nearly everyone pays the tax, roughly 3 percent of their monthly telephone bills. (It was temporarily hiked to 10 percent to help cover the costs of the Vietnam War.)
Following elimination of the tax, taxpayers will receive a refund of about $13 billion that has been collected on long-distance calls made since March 2003.
Putting it in broader perspective, the telephone tax was a fitting candidate for elimination because it violates some of the fundamental tenets of a good tax system.
First, it wasn’t transparent. Who knew they were paying it? Transparency is important because Americans need to know what they are paying in taxes—and why.
Second, the telephone tax was created as a temporary assessment. There is nothing inherently wrong with a temporary tax to address some compelling national purpose. But as this tax demonstrates, Congress doesn’t seem to understand what the word “temporary” means. Until Congress can live up to its agreements, Americans shouldn’t support temporary taxes.
So say goodbye to this monstrosity, and let’s take the next step towards implementing a 21st century tax system.