Magazine article Reason

Breaking the Levy: An Illegal Phone Tax

Magazine article Reason

Breaking the Levy: An Illegal Phone Tax

Article excerpt

IN DECEMBER A Washington, D.C., federal appeals court decided that a 3 percent federal excise tax on cell phone usage is illegal. It wasn't exactly a maverick ruling: The court joined eight other federal courts that have ruled the same way. The reds thus owe taxpayers $9 billion--three years' worth of unlawfully collected funds. Yet far from doling out refunds, the federal government has not even stopped collecting the tax.

The tax legally applies only to calls priced on distance, not the length of the conversation, a restriction that should exempt most Internet phone service and cellular calls. Yet the reds will continue to collect the levy on calls the D.C. court determined are legally exempt until the Bush administration decides whether to appeal the ruling. Consumers may eventually be eligible for a slice of the $9 billion overcharge. USA Today estimates that asking for your $49.52 would take seven hours of collecting bills and filling out paperwork. …

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