House overwhelmingly votes to repeal tax dating to Spanish-American War

WASHINGTON - The House voted overwhelmingly Thursday to repeal a federal telephone tax originally passed to finance the Spanish-American War, when telephones were a newfangled luxury enjoyed by fewer than 1,500 wealthy households.

Tackling another vintage tax Thursday, the House Ways and Means Committee approved a bill to gradually phase out inheritance taxes, which date to 1916. That bill is expected to reach the House floor in early June.

With the 3 percent telephone excise tax now affecting an estimated 252 million telephone lines - including those connected to cellular phones, fax machines and computer modems - Democrats and Republicans jockeying to be viewed as technology-friendly agreed it was time to use a portion of the projected budget surplus to scrap it.

''The Spanish-American War is history,'' said House Speaker Dennis Hastert, R-Ill. ''The Spanish-American War tax ought to be history as well.''

The House voted 420-2 to do away with the telephone tax in three equal steps, with full repeal coming Oct. 1, 2002. Reps. Fortney ''Pete'' Stark, D-Calif., and John Murtha, D-Pa., voted against the measure.

The bill, which would reduce government revenue by about $20 billion over five years, next moves to the Senate, where Sen. John Breaux, D-La., and other sponsors said they were encouraged by the strong House vote.

''This telephone tax serves no specific purpose,'' Breaux said.

The Clinton administration supports the concept of repeal but has expressed reservations about its cost. President Clinton, however, has stopped short of threatening a veto.

A person who spends $69 a month on both local and long-distance calls - the average for residential service according to one consumer survey - pays $24 a year to the Treasury under this tax. If that person also has a $30 monthly wireless bill, the total tax is $34 a year.

The original 1-cent telephone tax imposed in 1898 was repealed in 1902, brought back to pay for World War I, repealed again in 1924 and then resurrected during the Depression in 1932. The tax rate has gone up and down over the years, been targeted for phase-out and then made permanent in 1990 to help reduce the budget deficit.

''It's a classic example of a tax in Washington that just won't go away,'' said Rep. Rob Portman, R-Ohio.

Although the Republican-led Congress has made tax cuts of all kinds a priority this election year, the phone tax repeal gained bipartisan popularity because it was seen as a modest way to overcome part of the ''digital divide'' that hinders lower-income people from gaining access to the Internet.

''It doesn't finance any war, but it could be an impediment in our battle to provide universal access to the Internet,'' said House Minority Leader Dick Gephardt, D-Mo.

Thursday's vote was the latest in a series of tax cuts pushed by House Republican leaders, who are pursuing a piecemeal approach that frequently puts Democrats in a difficult political position. It was easier for Clinton and the Democrats to oppose last year's huge $792 billion tax cut, which the president vetoed, because opponents were able to hammer away at the high cost.

So far, none of this year's major tax cuts have passed the Senate, but House Republicans say they're accomplishing their main election-year purpose.

''We're going to have a lot of good things to talk to our constituents about,'' said Rep. J.C. Watts, R-Okla.

The estate tax bill would gradually repeal inheritance taxes by 2010. The bill has 240 co-sponsors including 45 Democrats, but Clinton is promising a veto because it would cost $104 billion over the phase-out period and some $50 billion a year after that. Estates under $675,000 are already exempt this year.

That high cost would jeopardize critical government spending and threaten efforts to ensure that Social Security and Medicare gain sound financial footing, opponents said.

''We can't just disregard our obligations,'' said Rep. Charles Rangel, D-N.Y., the top Democrat on the House Ways and Means Committee.

Sponsors said estate taxes frequently force family farms and small businesses to be sold or split up by heirs, disproportionately affecting minorities and women.

''That's what we're talking about when we talk about liquidating small farms and businesses,'' said Rep. John Tanner, D-Tenn.

But opponents said small businesses and farms already get special treatment under estate tax law. They pointed out that half of the $27 billion in estate taxes projected for this year will be paid by estates above $5 million, the wealthiest 10 percent.

On the Net

Congress:

http://thomas.loc.gov

Repeal the Tax on Talking Coalition site, which can calculate individual phone taxes:

http://www.repealthetaxontalking.org