The End of a "Rich Man’s Tax"

On April 25, 1889, the United States Congress declared war on Spain, thus starting the Spanish-American War. Since wars cost money, politicians immediately look to raise taxes to pay for the increased expenditures. As such, Congress passed a tax levy on the 1400 “rich” Americans who owned phones. This tax levy added 1-cent to the cost of each telephone call made. Since only the rich had phones, why not tax those bastards?

The war ended on December 10, 1889 with America victorious over the much weaker Spain. Unfortunately, the tax was never removed from the books. So the results were that over time, the tax was increased and suddenly everyone was paying the tax, not just the rich.

Now here are some important questions.

1) Why are we still paying a tax that was started to “tax the rich” and to pay for the Spanish-American War?
2) If this was done to be a tax on the rich, why are all of us non-rich folks paying this tax?

For question 1, there is some good news. This tax on long distance will FINALLY end on July 31, 2006, as the Federal Government will no longer collect the tax. Indeed, there will be a tiny refund for most of us, providing we jump through all the hoops required by the government, which will be done in 2007 via your 2006 income tax return. Unfortunately, as of this writing, you’ll still pay Federal tax on local service.

So now the question is, “Why WERE we paying this tax all this time when the Spanish-American War ended in 1898?” Simple. Once the government finds a way of getting more of your money, they aren’t going to just stop collecting it. The war may have been over, but politicians need to buy votes, which usually means spending wads of tax dollars in their districts or starting some new government program under the guise of, “We really, really care about you and want to help.” Sadly, the help is pretty weak and the cost to provide the “help” outrageous. That’s why over time, the tax was raised and revamped, as it was in 1965. In 1990, the tax was raised to 3%.

The government has been taken to court over this tax and has lost repeatedly. The courts have ruled that the tax is illegal FOURTEEN TIMES, but the government still collected the tax due to the way our laws are written. Aren’t our legislators clever in how they manage to keep the tax from being stopped by the courts and the government can continue to get fatter and fatter off of illegal taxes? Anyway, in 2005, again the IRS defended the tax in court. Who defended us poor, raped taxpayers? Ironically, it is the evil “Big Business” that took the government to court to put an end to this illegal and unjust tax.

While I do give credit to the Bush administration for finally saying, “the tax is over,” I’m annoyed that it took this long. Further, I’m annoyed that the congressional Joint Committee on Taxation is now crying about how much revenue the government will lose. Too bad, smeg heads! It isn’t your money and you aren’t entitled to it! Gah! The arrogance of our lawmakers never ceases to astound me! They claim that the poor government will lost $67 billion. In 1898, congress only allocated $50 million for the Spanish-American War! Smeg heads!

Now onto question 2. As with the first question, it must be modified in light of the tax being removed. “Why WERE we non-rich folks paying this tax?”

I’m sure you’ve heard our glorious law-makers squawking about making the rich pay more, and how any tax cuts automatically is a “tax-cut for the wealthy” (which only makes sense since the wealthy pay most of the taxes, it would stand to reason they’d get more dollars back…but I digress). Our law-makers have a long history of greedily looking to the so-called wealthy because “they can afford it” and then passing a tax to punish them for the crime of having money. Apparently only the government can be wealthy.

So with the mantra of “tax the rich” on their lips, congress assures you, the common folk, that this new tax won’t touch you, but will only tax those evil wealthy bastards. Since so many folks like the idea of rich people getting hit in the wallet, it is an easy sell. The problem is that anytime the government promises something, even with very good intentions, they put us on the Highway to Hell more often than not.

That’s what happened here. Even though the war was over in less than a year and congress only allocated $50 million for this war, why stop collecting the tax? As the Federal Government grew, its appetite for more tax money increased as well. Further, more and more Americans could now afford a phone as the cost of the technology went down. Ironically, to get rural (and often poor) folks hooked up to telephone service (and thus paying this rich-man’s tax), the government in 1949 enacted legislation to improve rural U.S. telephone service. I believe another tax was passed to do this as well, but at present have been unable to find the details in the sea of information.

So for as long as you’ve had a phone through August 1, 2006, you will have been paying a tax that was designed to be a rich-man’s tax to pay for the 1898 Spanish-American War. How does that make you feel?

By the way, those of you working hard and taking home more and more money should be alert for the Alternative Minimum Tax (Tax Reform Act of 1969). In 1969, congress attempted to punish a very few rich folks who used the tax law to get out of paying income tax. In 2005, the Treasury Department figures show that nearly 15% of households with incomes as low as $75,000 must pay the AMT! So when the government says that a new tax is only targeted at the rich, don’t believe it.

Sources:

ars-technica
Homeland Stupidity
Wikopedia
Chicago Tribune
Paul Bunyah Telephone
TMCnet
National Associateion of Manufactures
Treasury Department

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