- The Washington Times - Thursday, June 15, 2000

The Senate's tax-writing committee yesterday passed on a near-unanimious voice vote legislation to repeal by Sept. 1 the federal 3 percent telephone excise tax.

"This 'tax on talking' is outdated, unfair and complex for both consumers to understand and collectors to administer," said Senate Finance Committee Chairman William V. Roth Jr., Delaware Republican.

Proponents say the measure would save telephone users about $4.3 billion in 2001.

A similar bill, phasing in the repeal over three years, passed 419 to 2 in the House, and Senate Majority Leader Trent Lott, Mississippi Republican, said he would like to bring the measure to the Senate floor in the "next several weeks." But while Mr. Lott would like to have the repeal pass with no amendments even considered, Democrats and maybe even some of Mr. Lott's Republican colleagues are likely to object.

In the Senate Finance Committee yesterday, Sen. Bob Graham, Florida Democrat, was the sole voice of opposition to the tax cut.

Mr. Graham argued that Congress has a responsibility to treat budget surpluses "prudently." While repealing the telephone excise tax might sound good in isolation, Mr. Graham said, "I wouldn't rate [it] very high" when compared to securing the fiscal future of Social Security and Medicare, and providing tax cuts for education and promoting economic growth.

Mr. Roth responded that he supports both Medicare and Social Security reform, but "I do not believe tax cuts in a period of income-tax overpayments should be held hostage."

Mr. Roth joined a unified Republican front in an 11 to 9 vote, defeating an amendment by Mr. Graham that would have made the repeal of the telephone excise tax contingent upon reform of the two federal entitlement programs. Democrats on the committee supported Mr. Graham's amendment, but all voted for the repeal after the amendment failed.

Most federal excise taxes are tied to specific programs, such as the gasoline tax being used to fill the highway trust fund.

By contrast, the telephone excise tax first was imposed as a luxury tax to fund the Spanish-American War in 1898 and has been reinstated and increased to fund various wars since. Revenues from the tax go into the general fund.

Opponents of the tax argue that it hits poor families hardest for an item that is now considered a necessity of life.

Over the years, the repeal has not been a priority for either party, but sprang to life this spring as Republicans cast about for single-issue tax cuts that could easily be discussed, would be broadly popular and lent themselves readily to a public campaign.

Alternately dubbed by opponents as the "Spanish-American War tax" and the "tax on talking," the telephone excise tax met all three criteria with the added bonus that national communications and computer companies have made the repeal part of their agenda for easing access to the Internet.

The measure is the fourth in a series of single-issue tax cuts that Republicans have passed in the House and hoped to push through the Senate.

Others include a repeal of the earnings limit for Social Security beneficiaries which President Clinton signed into law tax breaks for married couples, and a repeal of the estate and gift tax.

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