The Spanish American war. Back in black.

[Almighty Colin]

An influential congressional committee has dropped a political bombshell by suggesting that a tax originally created to pay for the Spanish American War could be extended to all Internet and data connections this year.

The committee, deeply involved in writing U.S. tax laws, unexpectedly said in a report Thursday that the 3 percent telecommunications tax could be revised to cover "all data communications services to end users," including broadband; dial-up; fiber; cable modems; cellular; and DSL, or digital subscriber line, links.

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The congressional report comes not long after the Internal Revenue Service and Treasury Department said they were considering how the Spanish American War tax should be reinterpreted "to reflect changes in technology" used in "telephonic or telephonic quality communications." Tech companies including Microsoft, Intel and Skype slammed that idea in a September letter, asking the IRS to "refrain from any attempt to extend the excise tax to VoIP services."

The discussion in the tax committee's report, however, ventures far beyond VoIP. "Extending the tax to all communications requires taxing Internet access, bandwidth capacity, and the transmission of cable and satellite television," it says.

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Congress enacted the so-called "luxury" excise tax at 1 cent a phone call to pay for the Spanish American War back in 1898, when only a few thousand phone lines existed in the country. It was repealed in 1902, but was reimposed at 1 cent a call in 1914 to pay for World War I and eventually became permanent at a rate of 3 percent in 1990.

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James Maule, who teaches tax law at Villanova University and edits a related blog, said the more extreme taxation option may be a way for committee members to make the others "look a bit more palatable. There's some psychology going on."

"The odds of something happening in 2005 that amends the tax law is extremely high," Maule said, referring to President Bush's promise to revise the tax code. "I suspect that (one of these options) is going to be tacked on."

Source: news.com