Waste of the Day: Throwback Thursday: Paying Spanish-American War Tax a Century Later

Topline: The Spanish-American War ended in 1898, but it took over a century for Congress to completely stop charging a telephone tax created to fund it. The tax was finally eliminated in 2006, once the war was a distant memory.

Spanish-American War telephone tax raised billions

Americans spent $128.6 billion in total paying the tax, according to the IRS and Congressional Research Service.

It generated $5.9 billion in taxes in 2005, the most of any year. That’s one large phone bill: $9.8 billion in today’s money.

Key facts: The telephone excise tax was created in 1898 as a way to cover the federal budget deficit created by the war without imposing tariffs on other countries. Phone users had to make a “sworn statement” of how many lengthy phone conversations they had in a month and pay a tax of one penny for each.

Most Americans were unaffected. At the time, telephones were still a luxury item owned mostly by the rich. 

The tax raised $314,000 in 1900 and ended in 1901, but not for long. Congress revived it in 1917 and charged it almost every year until 2006, except for a pause from 1924 to 1932.

The tax rate changed often until the Omnibus Reconciliation Act of 1990, which set a flat 3% tax on telephone bills.

FCC continues without authorization

Search all federal, state and local government salaries and vendor spending with the AI search bot, Benjamin, at OpenTheBooks.com. 

Critical quote: Rep. Ed Royce, the former Republican congressman from California, was a cosponsor of the bill that ended the telephone tax.

He said at the time,

Only Washington would think to tax talking. It’s so unbelievable that it’s a perfect candidate for “Ripley’s Believe It or Not.”

I would think that after 102 years, we would have paid off the five months of the Spanish-American War. This tax should have ended with it. What else is there on the books? A surcharge for the Civil War? Maybe there’s a tariff on candles to pay for the Revolutionary War still being collected.

Background: The telephone tax may be gone, but taxpayers are still paying for the technology in other ways.

The Federal Communications Commission saw its outlays jump from $2.4 billion in 2000 to $28.4 billion in 2024, an increase of 1,195%, OpenTheBooks found. The agency’s authorization to receive Congressional funding expired in 2020, yet lawmakers continue to allocate funds anyway.

Summary: The telephone excise tax may seem silly today, but there’s plenty of other absurd ways the federal government uses taxpayer money. Some are just as antiquated as a war from the 19th century.

The #WasteOfTheDay is brought to you by the forensic auditors at OpenTheBooks.com.

This article was originally published by RealClearInvestigations and made available via RealClearWire.