It appears that Congress and the IRS didn’t get the “Mission Accomplished” memo dated August 12, 1898 announcing the end of the Spanish-American War. The skirmish only lasted 113 days, but would prove to provide confusion on consumer telephone bills for over a century.
It all started when Spain declared war on the United States on April 23, 1898. War is expensive and Congress needed a way to fund the effort. So, they did what governments do best and created a new tax. Problem was, citizens didn’t like new taxes. The solution? Enact a temporary luxury tax on only the richest citizens. Since very few people had telephones at the time, a temporary excise tax on phone service fit the bill.
A few months after the first shots were fired, the Treaty of Paris was signed putting an end to the war. But, what about the temporary luxury tax? Well, that proved to be not so temporary or luxurious.
Have you ever tried to decipher your phone bill? One of the vaguely described line items is a federal excise tax of 3 percent. That is your contribution to fund the Spanish-American War.
How much could the war have cost if we’ve been paying for it for over 108 years? Good question. Adjusted for inflation, the Spanish-American War cost taxpayers approximately $6 billion. The funny thing is the tax has raised around $300 billion.
Why am I telling you about this? It’s tax time again and this year it seems that Congress and the IRS have come to their senses and realized that Spain no longer poses a threat to national security. They have repealed the tax and you can get a refund on your return this year. The IRS says that the standard refund will range from $30 to $60, enough to pay for a week’s worth of Starbucks.
Before you get too happy, keep in mind the government will now have to find a way to make up for the $6 billion per year in lost revenues. Maybe a temporary luxury tax on Double Ristretto Venti Nonfat Organic Chocolate Brownie Frappuccino Extra Hot with Foam and Whipped Cream Upside Down Double Blended?