Private corporations impose taxes on Americans

0 Comments | Insight on the News, March 23, 1998 | by James P. Lucier, | Keith Russell

House Judiciary subcommittee on Commercial and Administrative Law Chairman George W. Gekas of Pennsylvania is trying to learn if Congress really has authorized three private corporations to tax Americans more than $40 billion during the next five years.

The taxes in question are showing up on long-distance telephone bills. "Congress passed the Telecommunications Act in 1996 intending to bring the benefits of open markets and competition to communications," said Gekas, whose subcommittee has begun holding hearings on the issue. "Lower costs and better service are the payoffs that so many of us sought for our constituents when we voted for the bill."

The 1996 act included provisions to extend communications service to rural areas and other regions where it is not economical to provide service. Following the breakup of the Bell monopoly, a settlement system called the National Exchange Center Association was set up to divide income from dollar flows and access charges among hundreds of local and long-distance carriers. Congress gradually added additional fee settlements, including costs mandated for the handicapped under the Americans with Disabilities Act. The 1996 act took this one step further with the establishment of a universal service fee to make service more widely available. Congress expected this to be modest.

Instead, the Federal Communications Commission, or FCC, in a controversial move, set up three nongovernment corporations and empowered them to tax telephone companies to fulfill the missions of these corporations. These institutions include the Schools and Libraries Corp., the Rural Health Care Corp. and the Universal Service Administrative Co. They already are beginning to hand out billions of dollars in grants to wire schools for the Internet, connect rural clinics to centralized databases and provide assistance to poor users. No specific authorization for these corporations exists, yet the FCC has set them up to tax to fund pet administration projects without counting it as revenue drawn from the U.S. Treasury.

Communications Daily says the administration has projected that the private tax will collect $3.3 billion in the current fiscal year, rising to $7.6 billion in fiscal 1999, $ 10 billion in fiscal 2000, $12.5 billion in fiscal 2001, $13.2 billion in fiscal 2002 and $13.3 billion in fiscal 2003.

Not surprisingly, Republicans on Capitol Hill tell news alert! that the operations of these unauthorized corporations were chosen for political purposes. They point out that Ira Fishman, the $200,000 chief executive officer of the Schools and Libraries Corp., has close ties to Vice President Al Gore.

But the fundamental question is whether a private corporation constitutionally can impose a tax. Says Gekas, "This is a real tax, imposed on every American and used to fund government programs and the federal bureaucracy."