What end of 3 percent long-distance tax means

Published: Thursday, June 1, 2006 at 6:01 a.m.
Last Modified: Thursday, June 1, 2006 at 12:00 a.m.
NEW YORK - You may want to sit down for this: The U.S. government has just ended a tax. Last week the Treasury Department announced it would stop collecting the 3 percent federal excise tax on long-distance telephone service that Americans have been paying since 1898, when the tax was first levied to help finance the Spanish-American War.
Not only that, taxpayers will get a refund for the past three years on their 2006 tax return. You'll be able to select a standard credit - the size of which the IRS has yet to determine - or claim the amount of tax you actually paid if you feel like digging through old telephone bills.
Now, 3 percent of your long-distance bill doesn't sound like much, but it applies to both land lines and cellular phones. If you're the kind of person who goes red in the face when your cellular statement arrives each month chock full of vague fees, surcharges and taxes, it's some small comfort.
The average cellular bill is around $50, of which about 17 percent is government taxes and fees, according to wireless carriers.
So how much will you save? The New York Times says probably about $18 a year. Industry - which sued to get the tax repealed - will likely save a bundle. The three-year refund will cost the government $15 billion, according to the U.S. Treasury.
Taxpayers may hope it's just the beginning. Outgoing Treasury Secretary John Snow has also asked Congress to repeal a similar excise tax on local phone service. But as for the myriad other ways by which the government lightens your pocketbook - the Universal Service Fund, 911 surcharges, state and local sales tax - hold neither your breath nor your phone calls.

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