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A century too late, illegal telephone excise tax dies.

By deepsand ·
In 1898 the US had no income tax; the federal government's only sources of funding were tarrifs and excise taxes. So, in order to fund the Spanish-American war, Congress enacted a luxury excise tax on telephones, which were then owned only by the wealthy.

Under the US Constitution, Article I, Section 8, Congress is authorized "To raise and support armies, but no appropriation of money to that use shall be for a longer term than two years.

What a long 2 years it's been.

Throughout the 20th centrury, every war fought by the US became an excuse to raise or extend the this tax. In 1966, under Pres. Johnson, it reached 10 percent, when he persuaded Congress that it was a good way to help pay for the Vietnam War.

During the '80s, it was scheduled to expire several times, but concerns over budget deficits came to its rescue, and the Revenue Reconciliation Act of 1990 made it permanent at three percent.

Now, finally, the Fed has decided to give up on this tax. One of various articles re. such reads as follows:

May 26, 2006

Fed Ends Excise Tax On Long Distance Calls

By David Haskin Courtesy of

The federal government Thursday said it is ending what Treasury Secretary John Snow called an "ancient" tax on long distance phone service.
The Treasury Department said in a statement that it will no longer pursue a legal dispute about the federal excise tax on long distance service and taxpayers will receive a tax refund on the taxes they've paid in the last three years. The refund will be part of the 2006 tax forms that are due on April 15, 2007. The tax adds about three percent to phone bills.

"It's time to 'disconnect' this tax and put it on the permanent 'do not call' list,'" Snow said in a statement. He also urged Congress to put an end to the part of the tax law that taxes local service. The tax was established in 1898 and was considered a luxury tax on citizens who were wealthy enough to own telephones.

In its statement, the Treasury Department said, "the federal excise tax on telephone calls is not compatible with today's modern information-age society." Snow called it, "an outdated, antiquated tax that has survived a century beyond its original purpose."

A number of courts have found the tax to be illegal and, in its statement, the Treasury Department said it would end any court actions attempting to continue the tax.

Is'nt it great that they're going to refund a whopping 3 years worth out of decades of illegal taxes?

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