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F I S C A L I M P A C T R E P O R T

SPONSOR Fox-Young

DATE TYPED 2/10/05 HM 8

SHORT TITLE Support Federal Telecommunication Tax Repeal

SB

ANALYST Rosen

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

Responses Received From

Attorney General’s Office (AGO)

Public Regulation Commission (PRC)

SUMMARY

Synopsis of Bill

House Memorial 8 asks New Mexico’s U.S. Senators to abolish the federal excise tax on tele-

communications services. Reasons for repeal of the tax include its antiquity (it was enacted for

the purpose of funding the Spanish-American War), that is was enacted as a luxury tax on the

then fledgling industry, that it is regressive, that it discourages investment in the network and

new technologies, and that both houses of the U.S. Congress repealed the tax in 2000 only to see

it vetoed by President Clinton.

Significant Issues

AGO reports such a repeal would reduce the telephone bill for most New Mexicans by 3%. PRC

reports such a repeal might further encourage use of voice and data telecommunication services.

According to PRC, this tax has been repealed and re-instated several times and has also been

utilized to fund World War I (at 5 cents per call) and World War II (at 20%). The tax has been

set at 3% since 1982, with several intended repeals cancelled over the years. The tax collects

about $5 billion per year for the U.S. Treasury.

JR/lg