You're Still Paying for the Spanish-American War

I read a very surprising article in USA Today the other day. It seems that we American consumers of telephone services have been paying an excise tax on our phone bills for a heck of a long time. Apparently, this tax was imposed back in 1898 -- get this -- to help pay for the Spanish-American War. Well, that war ended before the 20th century even began, and we're well into the 21st century now. Doesn't it seem like something's wrong here? Doesn't it make you think about banding with friends and tossing your phones into Boston Harbor?

The article made me dig out my last phone bill from Verizon (NYSE: VZ  ) . There it was -- "Federal Excise Tax." You'll probably find it listed on your bill, too. If your monthly bill amounts to around $100, at the current 3% rate for the tax (which has been as high as 25% in past years), you'll be paying $3 per month for this tax, or $36 per year. Heavy phone users might pay $100 or more per year. And all this, to pay for the Spanish-American War?

Even folks at AT&T (NYSE: T  ) don't like this tax. Jim Cicconi, AT&T's general counsel, has said that, "This is a 19th-century tax on a 21st-century technology. It makes no sense, and it ought to be repealed."

Fortunately, some in Congress agree, too. Rep. Gary Miller (R-Calif.) and nearly 100 co-sponsors recently introduced legislation to repeal the tax. USA Today noted: "This year, consumers and businesses will fork out another $6 billion in general excise taxes -- enough to pay for the Spanish-American War all over again, notes Rep. Christopher Cox, (R-Calif.)." Other businesses supporting repeal include Verizon, SBC, Time Warner (NYSE: TWX  ) , Radio Shack (NYSE: RSH  ) , Comcast (Nasdaq: CMCSA  ) , and America Online.

Courts have been finding the tax groundless, too, siding with consumers against the IRS more than half a dozen times.

In SmartMoney, Donald Luskin noted that some anti-war activists are refusing to pay the tax, arguing that it supports the war in Iraq. Luskin also added: "According to the San Francisco Examiner, AT&T says 'we believe this is an illegal tax.' Ask them in writing to remove the tax from your bill, and they'll do it. 'We'll go into our system and make an adjustment,' AT&T says. But, they warn, 'we will have to report you to the government.'"

Learn more in our Tax Center and our Tax Strategies discussion board. Also useful is the IRS website.

And by the way, if thinking about taxes in general makes your head hurt and you'd like an actual person (a financial pro, no less) to talk to about your financial situation, look into our TMF Money Advisor. It's a valuable service, featuring customized, personalized independent advice from a variety of objective financial experts.

Time Warner is aMotley Fool Stock Advisorpick. Try a 30-day free subscription and gain access to the best of David and Tom Gardner's stock ideas.

LongtimeFoolcontributorSelena Maranjianowns shares of Time Warner and Comcast. The Fool has an ironclad disclosure policy.


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