"The telephone tax is as old as Teddy Roosevelt's Rough Riders and just as obsolete," Grassley said. "The tax hits every telephone owner, but it doesn't pay for any specific program. It pours $5 billion into the U.S. Treasury each year for no reason. It's time to hang up the telephone tax."
Grassley introduced his measure, the Help Eliminate the Levy on Locution (HELLO)Act, with 19 bipartisan co-sponsors, including fellow Finance Committee members such as Sen. John Breaux (D-La.). Grassley said the telephone excise tax was imposed to fund the Spanish-American War in 1898. At the time, it was billed as a luxury tax, because only a handful of Americans had telephones.
Today, Grassley said, about 94 percent of American families have phone service. The telephone excise tax costs every family an additional 3 percent on top of it s monthly phone bill. The taxes collected simply go in the U.S. Treasury's general fund rather than pay for any specific programs, Grassley said.
Grassley said in addition to its obsolescence, the phone tax draws other equally strong arguments for its repeal: It hits poor families the hardest, since they already pay a higher percentage of their income for telephone service than higher income families. It presents complex billing questions as basic phone service becomes intertwined with data transmission and Internet access. It hinders economic expansion as businesses of all sizes increase their reliance upon phone lines for data transmission and Internet access.
"There's no reason to keep the telephone tax, and there's a long list of reasons to get rid of it," Grassley said. "It belongs in the graveyard of outmoded sections of the tax code, along with many other universally applied and wholly unfair levies that I hope to identify and target for repeal in the coming months."