Fewer may recall that the tax was enacted in 1898 as a temporary tax to fund the Spanish-American War and remains in place to this day. Federal Telephone Excise Taxes and You

Some readers undoubtedly know that they pay a three percent federal excise tax on telephone service.  Fewer may recall that the tax was enacted in 1898 as a temporary tax to fund the Spanish-American War and remains in place to this day, which is as good a reason as those countless others to be cynical about any government promise.

What even fewer may have heard is that there are finally some cracks in the federal tax machine, thanks to federal appeals courts which are marching one-by-one toward voiding at least the part of that tax that applies to "toll telephone" or long distance service.

The rulings result from changes in the way that charges for that service are currently calculated versus the way the tax statute is written.  You don't care much about the details of that.  You don't care much whether the decisions are being rendered by activist or originalist judges.  You should only care about the bottom line, which is still crooked despite the court rulings.

According to USA Today, the court rulings mean that "cellular phones, internet phone service and about one-third of long distance calls would be exempt from the tax.  The wireless industry estimates that consumers would save about $4.5 billion a year.  Taxpayers also would be due three years of refunds - about $9 billion."

The government, of course, has the right to appeal the rulings -- which do not jurisdictionally yet apply to most federal districts -- to the Supreme Court, but is tight-lipped about its intentions.  In states that are covered by the rulings, the government is still requiring collection of the taxes, to the consternation of those who have successfully challenged them.

Cases are active in the other federal district courts, and you may eventually live to see the taxes voided for the future.  But the refunds to which you are or would be entitled?  Well, to get your three years' worth, on average about $50, you will have to file individually, separately for every calendar quarter within the three years.  That could require so much time collecting records and filling out the forms that for most people it won't be worth the effort.

President Bush made tax relief a centerpiece of his administration's domestic policy, for great and good reason, including the economic stimulus that has worked.  But on this one relatively small tax the administration is dragging its feet even as the courts consistently roll snake eyes against it.  The solution is a populist no-brainer.  Just say the courts made us do it, void collection of the tax immediately and establish the simplest possible way for folks to know about and get the refunds to which the courts say they are entitled.

The tax refund won't be a lot of money for individuals.  But it would apply a lot of principle and show that, particularly when judged wrong, government is actually capable of remembering that it is supposed to be for the people.

That might last a few months before the big spenders in Congress try to get it all back, with considerable added vigorish to make up for the shortfall, not to mention the appeals courts' usurperous affront to the system

December 15, 2005
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