Saturday, May 27, 2006

Old, Old Tax Defeated

Astute libertarians have long and often cited an excise tax on long-distance telephone calls as proof that there is nothing quite so permanent as a temporary tax, and that yesterday's luxury becomes today's staple.

This temporary tax was enacted in 1898, in support of the Spanish-American War. Most Americans don't know squat about this war, much less remember the Maine, and yet they had been paying the tax on long-distance calls their entire lives. I guess this means the War is finally over! Hurrah!

The tax had been in the courts for years, and the federal government finally gave up after many appeals. From a Reuters report:

In a statement, U.S. Treasury Secretary John Snow also urged Congress to repeal the excise tax on local telephone service.

The Justice Department will no longer pursue litigation on the long-distance issue, the statement said.

The Treasury Department said taxpayers can claim a refund on their 2006 returns for the long-distance tax, which was established in 1898 as a luxury tax on wealthy Americans who owned telephones.

Snow, at a press conference on Capitol Hill with lawmakers, said the tax was "antiquated" and well-rid of.

"It's not often you get to kill a tax, particularly one that goes back so far in history," Snow said, adding that Treasury was pleased to concede this tax was no longer useful.

There really ought to be deeper criteria for a tax than its usefullness. It would be useful for me to grab a million dollars from somebody, but that whole morality thing gets in the way. Still- I'm grateful for the result.

Outstanding additional info is available on the TaxProf Blog.

Hat tip to Leo Morris of the Fort Wayne News-Sentinel for his entry in his blog.

Update: See Michael Jarrell's entry in his blog Un-Civil Defence.


Michael said...

As I posted a couple of days ago don't look for this tax to go away. Just because Snow says he'd like to see it go doesn't mean that the Beltway Boys are going to let it go. That's a considerable amount of cash for these people and, given their spending habits it's unlikely they'll be happy to let go of this one.

greg said...

Pretty amazing that they can collect it for 108 years but only have to refund 3 years worth. They may lose one tax but will probably replace it with three more.

Mike Kole said...

Indeed. It wouldn't have taken a Libertarian-dominated Congress but 30 days to identify and sunset scores of old 'temporary' taxes. Both Republicans and Democrats had their majorities over that time and only now, because the Republicans' cover is blown on tax & spend, they make symbolic and small gestures like this. Great if they follow through on the elimination of this burden, but the Bush Medicare prescription drug giveaway outweighs this and the tax cut by ab enormous amount.