According to the New York Times and the Washington Post, the U.S. Treasury Department Thursday said uncle in a legal dispute over the federal excise tax on long-distance telephone service. As a result, the IRS will be directed to refund tax paid on the service over the past three years. The tax will officially disappear on July 31. The Treasury Department said individuals will be allowed to claim refunds on their 2006 tax returns, filed in 2007, for taxes paid on long-distance telephone calls since March 2003. The long-distance tax was established in 1898 as a luxury tax on wealthy Americans who owned telephones and lawmakers needed money to fight the Spanish-American War. U.S. Treasury Secretary John Snow also urged Congress to repeal the excise tax on local telephone service.
Individuals who do not have to file a tax return will be instructed to use a special form to apply for the refund. Businesses would be required to calculate the taxes they paid before requesting their money back.
Of course, I would think most consumers will have no idea how much they paid specifically in long-distance taxes. Do you think we’ll get a statement from our current and past phone companies? I sort of doubt it. According to the treasury department, taxpayers can calculate the actual taxes paid and apply for a refund, or they can claim a standard amount that will be set later by the Treasury Department and Internal Revenue Service.
Even more worrisome: Snow estimated the cost of refunding taxpayers for three years of past taxes would total about $13 billion, and said that there would be no problem in finding that amount. Sayeth Snow, “The revenue stream is strong and can easily absorb this” If the revenue stream is that strong, then why aren’t we paying down the debt?
