Tax
Wizard
Winter 1999
A
Quarterly feature highlighting tax Web Sites
This
month we feature a press release from the House
Policy Committee
The
Policy Committee is the policy-making arm of the House Majority.
It is comprised of the House Leadership (the Speaker, the Majority
Leader, the Majority Whip, the Conference Chairman, the Policy
Chairman, the Conference Vice Chairman, the Conference Secretary,
the NRCC Chairman, and the elected leaders of the Junior, Sophomore,
and Freshman classes), the chairmen of key standing committees
of the House, and Members elected by region and seniority. The
Committee meets weekly to consider legislation and issues of national
importance.
ENDING
THE GORE TAX
With
Every Long-Distance Phone Call, Americans Pay the Price for
the Vice President's Costly Government Program
September
16, 1998
In
January 1998, without the legal power to do so, the Clinton
Administration demanded that every American pay a new tax on
their long-distance telephone calls. The tax has been dubbed
the "Gore Tax" because it is the pet project of Vice President
Al Gore. It will cost taxpayers an estimated $2.65 billion
this year. The Clinton budget calls for increasing this illegal
tax by 500% over the next five years.
Time
Magazine and other publications were among the first to label
this $2.65 billion new tax the "Gore Tax" in the course of reporting
Gore's cheerleading for it. Gore, they noted, successfully fought
for the inclusion of several sentences in the 1996 Telecommunications
Act that asked the Federal Communications Commission to "enhance"
schools' and libraries' access to "advanced telecommunications
and information services" such as the Internet. This language,
however, did not enact a new tax. But Al Gore demanded that
the FCC levy a massive new tax by regulation so that his Administration
could spend it without control by Congress.
The
illegal manner in which the Gore Tax is being extracted from
consumers makes it especially offensive.
The
Constitution clearly vests the power to tax in Congress alone.
Congress could not, if it wished to do so, "delegate" the authority
to set tax rates to an executive-branch agency. The Constitution
plainly prohibits the FCC or the Vice President from arrogating
this "authority" to themselves.
It
should therefore be unthinkable that the FCC could in turn delegate
taxing authority to a private corporation, the newly-created
Universal Service Administration Company. Yet this is precisely
what Clinton, Gore, and the FCC have done. They have even "authorized"
the company to set the rate of the tax itself.
Capping
this outrage is the way the Vice President has tried to hide
this astronomically expensive tax from the public. While the
FCC tapped long-distance companies to collect the tax, both
the Vice President and the agency waged a vigorous campaign
to block the phone companies from truthfully reporting the tax
to consumers. Instead of separating the Gore Tax on consumers'
bills, Gore's staff pressured long-distance companies to hide
the tax from the public.
In
response to this considerable political pressure, some phone
companies decided not to include the tax as a separate item
on consumers' bills. Instead, the tax was incorporated into
their basic per-minute rate. Some phone companies have, however,
chosen to separately itemize the tax on their phone bills. Most
have taken steps to avoid offending Gore by labeling the tax
in a euphemistic manner--such as describing it as a "universal
connectivity charge." Even now, the FCC and the Clinton Administration
are crafting rules that would keep the tax hidden from view.
If Al Gore has his way, the American people will never see the
true costs of his massive illegal tax.
The
E-Rate Program: A Good Idea Turned Illegal
The
tax revenues raised from the Gore Tax are earmarked to be spent
on subsidizing Internet access for schools and libraries. The
program itself pursues a laudable goal--one that is generally
consistent with the 1996 Telecommunications Act. But Congress
never authorized the FCC to set up the "E-Rate" program as engineered
by the Vice President and the Clinton Administration.
Not
only the Gore Tax but the E-Rate program it is being used to
finance violate the law. Already, the U.S. General Accounting
Office has declared key portions of the program to be illegal.
In a February 10, 1998, letter to Congress, the GAO wrote that
the FCC "exceeded its authority" when it created two private
corporations to administer the program.
Time
Magazine has described Gore's E-Rate program as "an out-of-control
entitlement engineered by an out-of-control bureaucracy." While
education bureaucracies have already requested more than $2
billion for 1998 alone--far more than originally estimated--only
4 percent of this is for Internet access. Fully two-thirds
will go for "internal connections," including the costs of ripping
up walls to install wiring, repairing carpets, painting, and
putting in new computers. Another reason for the excessive costs:
price is not the sole factor in evaluating a company's
bid to connect a school to the Internet, meaning that higher
cost bidders can be awarded contracts.
The
Schools and Libraries Corporation shows the effects of being
uncontrolled by Congress or the law. The private company created
to dispense the largesse raised by the Gore Tax was to pay its
Chief Executive Officer, a former Gore aide, an annual salary
of $200,000--as much as the President of the United States,
and more than every Cabinet officer and Member of Congress.
A
Dangerous Federal Intrusion Into Local Educational Decision-Making
"President
Clinton has said that we must provide our children with
an education that is second to none. . . . Approval of the
E-Rate is the cornerstone which makes that goal a reality."
--Vice
President Al Gore
"What's
wrong with education cannot be fixed with technology. .
. . We can put a Web site in every school--none of this
is bad. It's bad only if it lulls us into thinking we're
doing something to solve the problem with education."
--Steve
Jobs, founder of Apple Computer
Perhaps
the most dangerous consequence of illegally enacting both the
Gore Tax and the E-Rate program is that policy makers have yet
to consider the unintended effects. The program is a massive
federal involvement in local educational decision-making. Under
the E-Rate program, the federal government will change the way
every teacher runs every classroom in America. Some 30,000 schools
across the country are being lured by the prospects of generous
subsidies to rush forward to join the Gore program--and to do
so without fully understanding its true costs, or the real merits
of the Net as a teaching tool.
While
wiring classrooms has been described as a one-time capital investment,
in fact, it's more properly analogized to introducing a massive
annual cost. The Gore E-Rate program will necessarily
displace local school resources that might be put to better
use elsewhere, such as hiring new teachers or reducing class
sizes. It will require that local funds be spent to train teachers
how to use computers in class, and to constantly upgrade computer
hardware and software. According to one study, every dollar
spent on wiring schools requires schools to spend an additional
$3 on computers and related equipment. Most participants in
the Gore program won't fully realize these downstream costs
until they've already headed well down that road.
And
even as the E-Rate program is effectively forcing the Internet
into America's schoolrooms, experts are sharply divided over
whether this will produce significant educational benefits--or
instead, dilute students' attention to language and encourage
"surfing" and "browsing" instead of a more disciplined approach
to learning. Yale University's Professor of Computer Science
David Gelernter (whose ardent support of technology made him
a target of the Unabomber) expresses great skepticism about
the Gore program. It is, he said, "toxic quackery" and an "educational
disaster in the making." The Atlantic Monthly has reported
that some schools have already eliminated music, art, or physical
education programs in order to find more funding for computers
in classrooms. And parents are increasingly expressing concern
about how computers are being used, in the wake of anecdotes
and news reports that schoolchildren are using the Internet
during class hours for non-educational purposes, or even to
view obscene or objectionable material.
If
it remains a question how best to use computers in the classroom,
there is all the more reason that Congress should reclaim its
rightful powers to tax and spend--so that national policy will
be considered by our elected representatives before it is imposed
on the entire nation.
Bi-Partisan
Condemnation of the Gore Tax
The
Clinton Administration's new taxes have made telephone service
among the most heavily-taxed services in America. These new
taxes are making it far more expensive than necessary for parents
to stay in touch with their children at college, for small businesses
to sell products across state lines, or for families to get
caught up during the holidays.
Prior
to the Gore Tax, federal taxes and fees were already adding
$13 billion a year to the price of phone calls. The 3% federal
excise tax costs consumers $5 billion annually. Another $8 billion
is collected from consumers through a $3.50 monthly "subscriber
line charge" that the federal government imposes on every phone
line in America. In 1997, the Clinton Administration's FCC pushed
through its "modem tax," requiring every household with a second
phone line to pay an additional $1.50 per month to raise more
money to subsidize phone service in rural and high-cost areas.
For
these reasons, the Chairmen and senior Democrats on the House
and Senate Commerce Committees are demanding the dismantling
of both the Gore Tax and the E-Rate program. In a joint letter,
they called the whole scheme "a spectacular failure" and "a
raw deal for consumers." Two senior Democrats have been especially
outspoken in their criticism of the Gore Tax:
- Rep.
John Dingell (D-MI): "We did not vote to have the FCC set
up a giant bureaucracy headed by someone paid as much as the
President. The era of Kings in this country ended when we
kicked out George III."
- Sen.
Fritz Hollings (D-SC): "Congress did not intend for the FCC
to raise telephone rates of every-day Americans to fund these
programs. If the Commission won't start protecting ratepayers,
then Congress will step in and do it for them."
Liberal
advocacy groups, too, have been highly critical--not just of
the costly new tax, but also of the secretive way in which it
has been implemented. The Consumer Federation of America, for
instance, has called for repeal of the Gore Tax. A spokesman
for the group has said that, while the group supports the goals
of the E-Rate program, the FCC "could fund all these programs
without raising anybody's bill. . . . We hate the way [the FCC
is] paying for it."
Congress
is Committed to Eliminating the Gore Tax
The
Congress understands that a daily necessity like telephone service
shouldn't be taxed as if it were a luxury. Instead of raising
your phone bills, the majority in Congress wants to reduce telephone
taxes by ending the 5% Gore Tax, cutting the existing excise
taxes, and using existing telephone taxes to finance a more
thoughtfully designed E-Rate program. This responsible action
will ensure that the government does not lead businesses, schools,
and telephone users even further down a path that could cost
them billions of dollars. It will also help ensure that local
school districts have the opportunity to give careful study
to both the costs and benefits of using the Internet in our
Nation's classrooms.
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