Telecom Taxorama

MIDNIGHT -- As recently observed on The Philter, the Federal Communications Commission (FCC) is looking for a budget increase and hopes to collect more than $300 million in regulatory fees next year (see The FCC's Budget Outlook).

This gets you thinking about the size and cost of the United States’ largest telecom regulatory agency.

If you think $300 million is a lot of money to set aside for the monitoring of Janet Jackson's right breast, it turns out that far more than that is collected as telecom tax revenue by the federal government. The FCC’s origins are in the Communications Act of 1934. But well before the FCC was formed, the U.S. government started collecting the telephone excise tax -- the largest telecommunications-related tax in the country -- whose origins go back to 1898. This tax, which takes a slice of every phone bill, now raises more $5 billion a year in tax revenue.

Wonder how it all got started? It can be tracked back to the Spanish-American War, according to the IRS's Statistics of Income Bulletin:

    The telephone excise tax has been in effect for most years since it was enacted by the War Revenue Act of 1898. Originally designed as a luxury tax imposed on the few fortunate enough to own telephones, it was first used to provide funding for the Spanish-American War effort at the close of the 19th Century. The Act defined the base of the tax and set the rate in a single sentence.
Guess that war lasted a little longer and cost a little more than we thought.

— R. Scott Raynovich, US Editor, Light Reading

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