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A Tax Is A Hard Thing To Kill

The Politico’s latest “Pit Boss” column has a fascinating discussion on the repeal of the 100 year old telephone excise tax:

The story begins in 1898, when Congress imposed a penny-per-phone-call tax to pay for the war against Spain over the liberation of Cuba. The tax was aimed at the well-to-do because most people could not afford telephone service then. The war lasted just 10 weeks, but the tax has endured for more than a century, growing in 2006 to 3 percent on local and long-distance calls.Over time, the payers of the tax have changed even more dramatically as businesses used their deep pockets to beat back the tax in court and upper-income households adopted more modern modes of communication than those enjoyed a century ago. People who use cell phones or those who buy bundled services are not subject to the tax. So today, those who still pay the tax are people who cannot afford or do not want today’s newfangled technology.

I think the lesson is that governments always become immediately addicted to any source of revenue it receives. This is evidenced in discussions of tax credits when the issue is usually framed in terms of “cost” to the government.

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