Fresh Protests Seek Federal Excise Tax Demise

Telecom Policy Report, April 17, 2006

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The petition maintains that because the FET has been ruled unlawful by the U.S. Courts of Appeals for the Sixth, Ninth and District of Columbia judicial circuits, long-distance customers in Alabama, the District of Columbia, Florida, Georgia, Kentucky, Michigan, Ohio and Tennessee (within those federal judicial circuits) should immediately benefit, should the court halt the tax collection.

The basic argument is that the FET - routinely paid by millions of Americans monthly - never was authorized by Congress, and the lawsuit seeks a total end to the IRS collections and monetary restitution for taxpayers of up to $9 billion.

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The motion was filed by the Cuneo Gilbert & LaDuca, LLP law firm that is the lead counsel for the plaintiffs in the Sloan et al. v. United States of America lawsuit filed last month at the U.S. District Court for the District of Columbia. Since at least 1997, according to the consumer complaint, the U.S. government has violated the Constitution by imposing a tax "unauthorized by Congress" on the long-distance telephone charges of tens of millions of Americans."

"As technology changed and more telephone services were billed at flat rates, the government never went back to Congress to seek a three percent excise tax on flat long distance service based on elapsed time only," says attorney Jonathan Cuneo. "Instead, the government simply imposed the tax, which is small and goes unnoticed by most individuals, who have little recourse but to pay it."

The corporate cases are similar to Sloan, et al., according to attorney Hank Levine of Levine, Blaszak, Block & Boothby, LLP, one of the plaintiffs' lawyers and another lead counsel. "The companies that challenged the tax - and won - have performed a valuable service," he says. "But even as companies have been winning relief from this unauthorized tax, no one told small taxpayers they are being systematically fleeced every month, year in and year out. This lawsuit will give individual Americans justice."

Additional FET bashing emerged from plaintiffs' attorneys Christopher Weld of Todd & Weld, LLP, and Robert Cynkar of Egan, Fitzpatrick, Malsch & Cynkar, PLLC (a former assistant U.S. attorney general during the Reagan administration), and Professor Charles Tiefer of the University of Baltimore Law School (former deputy counsel to the U.S. House of Representatives from 1984 to 1995 who also represents the plaintiffs).

"Nothing in the long-distance carriers' phone bills discloses to consumers that this tax is illegal or offers the payer any information on how to challenge the bill," Tiefer says. "Even if individuals knew of the illegal tax, the relatively small amounts of money involved and complexity and cost of trying to recover it means they effectively have no recourse but to pay it."

There have also been political rumblings about the FET. Sen. Charles Schumer (D-N.Y.), for instance, several times has blasted the continued imposition of FET and he has criticized the IRS for continuing to collect the FET despite the court rulings. Since earlier this year (TPR, Jan. 17), Schumer's been threatening that unless there's an Administration reversal in FET, he'll be "pushing" legislation to end the levy.

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Fresh Protests Seek Federal Excise Tax Demise

Telecom Policy Report, April 17, 2006

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