[Congressional Record Volume 147, Number 14 (Thursday, February 1, 2001)]
[Senate]
[Pages S1012-S1013]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself, Mr. Breaux, Mr. Smith of Oregon, 
        Mr. Cleland, Mr. Murkowski, Ms. Landrieu, Mr. Crapo, Mr. Bayh, 
        Mr. Jeffords, Mr. Kyl, Mr. Roberts, Mr. Helms, Mr. Bunning, Mr. 
        Santorum, Mr. Craig, Mr. Stevens, Mr. Fitzgerald, Mr. Burns, 
        Mr. Gregg, and Mr. Hatch):
  S. 234. A bill to amend the Internal Revenue Code of 1986 to repeal 
the excise tax on telephone and other communications services; to the 
Committee on Finance.
  Mr. GRASSLEY. Mr. President, I rise today, along with Senator Breaux 
and others, to introduce a bill to repeal the

[[Page S1013]]

telephone excise tax--the Help Eliminate the Levy on Locution Act known 
as the HELLO Act. The telephone excise tax is a tax that is outdated, 
unfair, and complex for both consumers to understand and for the phone 
companies to administer. It cannot be justified on any tax policy 
grounds.
  Mr. President, the federal government has had the American consumer 
on ``hold'' for too long when it comes to this tax. The telephone 
excise tax has been around for over 102 years. In fact, it was first 
imposed in 1898--just 22 years after the telephone itself was invented. 
So quickly was it imposed that it almost seems that Uncle Sam was there 
to collect it before Alexander Graham Bell could put down the receiver 
from the first call. In fact, the tax is so old that Bell himself would 
have paid it!
  This tax on talking--as it is known--currently stands at 3 percent. 
Today, about 94 percent of all American families have telephone 
service. This means that virtually every family in the United States 
must tack an additional 3 percent on to their monthly phone bill. The 
federal tax applies to local phone service; it applies to long distance 
service; and it even applies in some cases to the extra amounts paid 
for state and local taxes. It is estimated that this tax costs the 
American public more than $5 billion per year.
  The telephone excise tax is a classic story of a tax that has been 
severed from its original justifications, but lives on solely to 
collect money.
  In truth, the Federal phone tax has had more legislative lives than a 
cat. When the tax was originally imposed, Teddy Roosevelt was leading 
the Rough Riders up San Juan Hill. At that time, it was billed as a 
luxury tax, as only a small portion of the American public even had 
telephones. The tax was repealed in the early 20th century, but then 
was reinstated at the beginning of World War I. It was repealed and 
reinstated a few more times until 1941, when it was made permanent to 
raise money for World War II. In the mid-60s, Congress scheduled the 
elimination of the phone tax, which had reached levels of 10 and 25 
percent. But once again, the demands of war intervened, as the 
elimination of the tax was delayed to help pay for Vietnam. In 1973, 
the phone tax began to phase-out, but one year before it was about to 
be eliminated, it rose up yet again--this time justified by the 
rationale of deficit reduction--and has remained with us ever since.
  This tax is a perfect example of why we must stop needlessly 
collecting the taxpayer's money--it does not pass any of the 
traditional criteria used for evaluating tax policy. First, this phone 
tax is outmoded. Once upon a time, it could have been argued that 
telephone service was a luxury item and that only the rich would be 
affected. As we all know, there is nothing further from the truth 
today.
  Second, the federal phone tax is unfair. Because this tax is a flat 3 
percent, it applies disproportionately to low and middle income people. 
For example, studies show that an American family making less than 
$50,000 per year spends at least 2 percent of its income on telephone 
service. A family earning less than $10,000 per year spendings over 9 
percent of its income on telephone service. Imposing a tax on those 
families for a service that is a necessity in a modern society is 
simply not fair.
  Third, the federal phone tax is complex. Once upon a time, phone 
service was simple--there was one company who provided it. It was an 
easy tax to administer. Now, however, phone service is intertwined with 
data services and Internet access, and it brings about a whole new set 
of complexities. For instance, a common way to provide high speed 
Internet access is through a digital subscriber line. This line allows 
a user to have simultaneous access to the Internet and to telephone 
communications. How should it be taxed? Should the tax be apportioned? 
Should the whole line be tax free? And what will we do when cable, 
wireless, and satellite companies provide voice and data communications 
over the same system? The burdensome complexity of today will only 
become more difficult tomorrow.
  As these questions are answered, we run the risk of distorting the 
market by favoring certain technologies. There are already numerous 
exceptions and carve-outs to the phone tax. For instance, private 
communications services are exempt from the tax. That allows large, 
sophisticated companies to establish communications networks and avoid 
paying any federal phone tax. It goes without saying that American 
families do not have that same option.
  Speaking of complexity, let me ask if anyone has taken a look at 
their most recent phone bill. It is a labyrinth of taxes and fees piled 
one on top of another. We may not be able to figure out what all the 
fees are for; but we do know that they add a big chunk to our phone 
bill. According to a recent study, the mean tax rate across the country 
on telecommunications is slightly over 18 percent. That is about a 6 
percent rise in the last 10 years. I can't control the state and local 
taxes that have been imposed, but I can do my part with respect to the 
federal taxes. I seek to remove this burden from the citizens of my 
state--and all Americans across the country.
  As members of Congress, we need to make sure that our tax policies do 
not stifle that economic expansion. We should not adhere to policies 
that are a relic from a different time. In today's economy, the 
arguments for repeal are even stronger.
  Mr. President, it is time to end the federal phone tax. For too long 
while America has been listening to a dial tone, Washington has been 
hearing a dollar tone. This tax is outmoded. Why are we taxing a poor 
family's phone with a tax that was originally meant for luxury items. 
Mr. President, it is time we hung up the phone tax once and for all. I 
urge my colleagues to join me in supporting its repeal, and help all 
Americans to say ``Hello.''
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 234

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Help Eliminate the Levy on 
     Locution (HELLO) Act.''.

     SEC. 2. REPEAL OF EXCISE TAX ON TELEPHONE AND OTHER 
                   COMMUNICATIONS SERVICES.

       (a) In General.--Chapter 33 of the Internal Revenue Code of 
     1986 (relating to facilities and services) is amended by 
     striking subchapter B.
       (b) Conforming Amendments.--
       (1) Section 4293 of such Code is amended by striking 
     ``chapter 32 (other than the taxes imposed by sections 4064 
     and 4121) and subchapter B of chapter 33,'' and inserting 
     ``and chapter 32 (other than the taxes imposed by sections 
     4064 and 4121),''.
       (2)(A) Paragraph (1) of section 6302(e) of such Code is 
     amended by striking ``section 4251 or''.
       (B) Paragraph (2) of section 6302(e) of such Code is 
     amended by striking ``imposed by--'' and all that follows 
     through ``with respect to'' and inserting ``imposed by 
     section 4261 or 4271 with respect to''.
       (C) The subsection heading for section 6302(e) of such Code 
     is amended by striking ``Communications Services and''.
       (3) Section 6415 of such Code is amended by striking 
     ``4251, 4261, or 4271'' each place it appears and inserting 
     ``4261 or 4271''.
       (4) Paragraph (2) of section 7871(a) of such Code is 
     amended by inserting ``or'' at the end of subparagraph (B), 
     by striking subparagraph (C), and by redesignating 
     subparagraph (D) as subparagraph (C).
       (5) The table of subchapters for chapter 33 of such Code is 
     amended by striking the item relating to subchapter B.
       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts paid pursuant to bills first rendered 
     on or after 30 days after the date of the enactment of this 
     Act.
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