[Congressional Record Volume 144, Number 41 (Thursday, April 2, 1998)]
[Senate]
[Pages S3125-S3126]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCAIN:
  S. 1909. A bill to repeal the telephone excise tax; to the Committee 
on Finance.


              the telephone excise tax repeal act of 1998

  Mr. McCAIN. Mr. President, I rise to offer a bill to repeal the three 
percent federal excise tax that all Americans pay every time they use a 
telephone.
  Under current law, the federal government taxes you three percent of 
your monthly phone bill for the so-called ``privilege'' of using your 
phone lines. This tax was first imposed one hundred years ago. To help 
finance the Spanish-American War, the federal government taxed 
telephone service, which in 1898 was a luxury service enjoyed by 
relatively few. The tax reappeared as a means of raising revenue for 
World War I, and continued as a revenue-raiser during the Great 
Depression, World War II, the Korean and Vietnam Wars, and the chronic 
federal budget deficits of the last twenty years.
  Earlier this month, however, we received some long-overdue good news: 
thanks to the Balanced Budget Act enacted by the Congress in 1997, the 
Congressional Budget Office projected an $8 billion federal budget 
surplus for 1998. Mr. President, that announcement should mean the end 
of the federal phone excise tax.
  Here's why. First of all, the telephone is a modern-day necessity, 
not like alcohol, or furs, or jewelry, or other items of the sort that 
the government taxes this way. The Congress specifically recognized the 
need for all Americans to have affordable telephone service when it 
enacted the 1996 Telecommunications Act. The universal service 
provisions of the Act are intended to assure that all Americans, 
regardless of where they live or how much money they make, have access 
to affordable telephone service. The telephone excise tax, which bears 
no relationship to any government service received by the consumer, is 
flatly inconsistent with the goal of universal telephone service.
  It's also a highly regressive and unfair tax that hurts low-income 
and rural Americans even more than other Americans. Low-income families 
spend a higher percentage of their income than medium- or high-income 
families on telephone service, and that means the telephone tax hits 
low-income families much harder. For that reason the Congressional 
Budget Office has concluded that increases in the telephone tax would 
have a greater impact on low-income families than tax increases on 
alcohol or tobacco products. And a study by the American Agriculture 
Movement concluded that excise taxes like the telephone tax impose a 
disproportionately large tax burden on rural customers, too, who rely 
on telephone service in isolated areas.
  But, in addition to being unfair and unnecessary, there is another 
reason why we should eliminate the telephone excise tax. Implementation 
of the Telecom Act of 1996 requires all telecommunications carriers--
local, long-distance, and wireless--to incur new costs in order to 
produce a new, more competitive market for telecommunications services 
of all kinds.
  Unfortunately, the cost increases are arriving far more quickly than 
the new, more competitive market. The Telecom Act created a new subsidy 
program for wiring schools and libraries to the Internet, and the cost 
of funding that subsidy has already increased bills for business users 
of long-distance telephone service and for consumers of wireless 
services. Because of more universal service subsidy requirements and 
other new Telecom Act mandates, more rate increases for all users will 
occur later this year and next year.
  Mr. President, the fact that the Telecom Act is imposing new charges 
on consumers' bills makes it absolutely incumbent upon us to strip away 
any unnecessary old charges. And that means the telephone excise tax.
  Mr. President, the telephone excise tax isn't a harmless artifact 
from bygone days. It collects money for wars that are already over, and 
for budget deficits that no longer exist, from people who can least 
afford to spend it now and from people who will have new bills to foot 
as the 1996 Telecom Act gets implemented. That's unfair, that's wrong, 
and that must be stopped.
  San Juan Hill and Pork Chop Hill have now gone down in history, and 
so should this tax.
  Mr. President, I ask unanimous consent that the text of the bill 
appear in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1909

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. REPEAL OF TELEPHONE EXCISE TAX.

       (a) In General.--Effective with respect to amounts paid 
     pursuant to bills first rendered on or after January 1, 1999, 
     subchapter B of chapter 33 of the Internal Revenue Code of 
     1986 (26 U.S.C. 4251 et seq.) is repealed. For purposes of 
     the preceding sentence, in the case of communications 
     services rendered before December 1, 1998, for which a bill 
     has not been rendered before January 1, 1999, a bill shall be 
     treated as having been first rendered on December 31, 1998.
       (b) Conforming Amendment.--Effective January 1, 1999, the 
     table of subchapters for

[[Page S3126]]

     such chapter is amended by striking out the item relating to 
     subchapter B.
                                 ______