May 25, 2006

Wireless Users No Longer Charged Federal Excise Tax

By Susan J. Campbell
TMCnet Contributing Editor

As a wireless user, aren’t you glad that have been able to do your civic duty in financing the Spanish-America War? Yes, I am talking about the same war that took place at the turn of the century – the last century.

The United States Treasury has made a decision to abandon its legal dispute over the federal excise tax (FET) on long-distance telephone service. This 108-year-old FET was instituted in 1898 to finance the Spanish-American War and adds 3 percent to the monthly bill of every wireless user in America. To date, that number exceeds 214 million estimated subscribers.

The Wireless Association President and CEO Steve Largent congratulated the US Treasury on its decision, pointing out that the Spanish-American War ended successfully a long time ago. After a rough ride for consumers, the battle over the FET has also come to an end.

Largent continued, stating that today, every wireless subscriber in the nation can celebrate a much-deserved 3 percent tax cut. Without the millions of wireless users all across America lending their voice to this effort, the Wireless Association may not have reached this important day.

The federal surcharge was found to be illegal by five separate U.S. Circuit Courts of Appeals. As a result, the Internal Revenue Service has come under increasing pressure in recent months to repeal the FET.

The ancient tax was levied on phone calls, but the charges varied based on the call’s duration and distance traveled. The wireless industry changed its strategy and abandoned this tariff years ago in favor of offering consumers “all-distance” minutes.

Now that the FET is finally taking its rightful place along side the Spanish-American War in US history books, wireless consumers can now turn their attention and efforts to repealing discriminatory wireless taxes on the state and local level, continued Largent.

It is the numerous state and local wireless-specific surcharges Largent was referring to that contribute to the average wireless American user paying 17 percent of his or her monthly bill in taxes and fees. The CTIA (Cellular Telecommunications & Internet Association) is seeing an influx of Americans turning to wireless to meet their telecommunication’s needs. As a result, state and local policy makers are looking at the growing number of wireless consumers to plug holes in their budgets.

Largent pointed out that these taxes can be roadblocks to low or fixed-income Americans who want to enjoy the benefits and efficiencies that only wireless can deliver. Some public bodies still considering tax policies that discourage segments of the population from taking part in the wireless revolution makes no sense at all.

It is also unfortunate that our government has historically demonstrated mismanagement of our tax dollars as this excise tax should have ended with the war. Instead, it was collected for years to fund other things for which it was never intended. Most likely, we will probably see a replacement tax pop up on the ballot in the near future as our government tends to hate to do without that which it is accustomed to.

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