Monday, August 1, 2011

The IRS Website and 1898 Taxes

Everybody's favorite website, IRS.gov, has a series of webpages on Understanding Taxes for students.  Under the subject, the WHYS of TAXES, Theme 5: Impact of Taxes, Lesson 1: How Taxes Influence Behavior, there is an historical tax question on the first time telephones were taxed.  The question is phrased as follows:

Which of the following items was first taxed as a luxury in 1898, at the start of the Spanish-American War and continues to be taxed today?

A.  The phonograh
B.  The telephone
C.  The automobile
D.  The radio

The answer is B, the telephone.

IRS.gov webpage screen capture


I don't exactly know how these taxes were paid, but AT&T used many high value documentaries:



We all continue to pay telephone taxes with roots in the 1898 law.  It is hard to imagine today that phones could ever be considered a luxury, though their ubiquity has certainly taken their everyday use beyond essential.  Sexting is somewhere in the luxury, if not vice, category.  I don't know the law, but I wonder when, for tax purposes, the telephone tax ceased to be considered a luxury tax.

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