- The Washington Times - Thursday, May 18, 2000

The House's tax-writing committee yesterday unanimously approved a plan to repeal a century-old, on-again, off-again excise tax on telephone and teletype services.

"Whether it was used to help fund wars or simply to put more money in the federal coffers, public policy-makers have always figured out a way to keep this cash cow around," said Rep. Rob Portman, Ohio Republican.

"This tax is regressive and increasingly hard to administer," said Rep. Robert T. Matsui, California Democrat, who is co-sponsoring the excise-tax repeal.

The repeal would begin to take effect 30 days after enactment, be fully phased in over three years, and save taxpayers about $20 billion over the next five years.

In the Senate, a similar repeal was introduced by Sens. William V. Roth Jr., Delaware Republican, and John B. Breaux, Louisiana Democrat.

Mr. Roth, who chairs the Senate's tax-writing committee, hopes to bring it up this year, but has not yet placed it on the schedule, said Ginny Flynn, spokesman for the committee.

In recent years, the repeal has not been a priority for either party, but it found new life this spring because it fits the Republican plan to pass a series of discreet and hopefully irresistible tax cuts instead of one gigantic tax-cut plan. Democrats like the repeal because it most helps working-class families, but worry how it will fit into the overall budget.

The telephone excise tax was first imposed in 1898 to help finance the Spanish-American War. The tax, then only on long-distance calls, was repealed in 1902, but reinstated during World War I. It was again repealed in 1924, but reenacted in 1932. During World War II, it was extended to include local service.

The tax has been in effect ever since, despite periodic legislation to repeal or phase it out, and today remains at 3 percent.

There are numerous exemptions to the tax, including local calls from pay phones, leased telephone lines, long-distance calls made in the collection of news by the public press, and long-distance calls by members of the armed services who are stationed in combat zones.

Treasury Secretary Lawrence H. Summers said the tax is economically inefficient and becoming increasingly difficult to administer as "technological advances blur the distinction between taxable and nontaxable communications services."

Nonetheless, while the repeal is a "worthy policy objective," it should "only be enacted as part of an appropriate, overall budget framework," Mr. Summers said in a letter yesterday to House Ways and Means Committee Chairman Bill Archer, Texas Republican.

Rep. Jerry Weller, Illinois Republican, accused the administration of "hedging" and House Speaker J. Dennis Hastert, Illinois Republican, said the administration's "maneuvering … is disturbing."

Others noted that Democrats and President Clinton earlier this year raised similar objections to repealing the earnings limit on Social Security benefits just days before reversing course and announcing they would back the repeal.

Senate Minority Leader Tom Daschle, South Dakota Democrat, said he had been persuaded by Sen. Charles S. Robb, Virginia Democrat, that the repeal "is overdue." Mr. Robb is one of the cosponsors of the Senate version of the bill.

"I not only support, it but will join [Mr. Robb] in making whatever effort necessary on this side to repeal it," Mr. Daschle said.

Mr. Archer jokingly countered that former Virginia Gov. George F. Allen who is challenging Mr. Robb in his bid for re-election is the "only reason" he brought the repeal up in his House Ways and Means Committee.

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