Dear Colleague Letter from Rep. Billy Tauzin.
Re:  Proposal to Change Universal Service Support for Schools and Libraries Program.
Date:  June 11, 1998.
Source:  Office of Rep. Billy Tauzin.   This document was created by scanning and converting to HTML a fax copy of the original.  The original contained fonts, formatting, table features which are not reproduced exactly in this document.  The letterhead and signature are not reproduced here.  This document has not been edited for content.

June 11, 1998

To tax or not to tax?
If that's the question, then what's the answer?
"...Just say NO to the Gore tax"

Dear Colleague:

Having received so many calls on the E-rate, universal service fund, the Gore tax, or whatever else it's being called today, it's time to set the record straight. Newspaper reports would lead you to believe that Congress is against schools and libraries. Nothing could be further from the truth.

The Telecommunications Act of 1996 provided that America's schools and libraries should receive federal help in the form of discounted rates from our universal service fund for telecommunications services. Congress told the FCC to expand an existing industry-funded program that provides low-cost telephone service in rural areas and inner cities into one that would also provide discounted Internet services for schools and libraries. Congress did not intend, insinuate, nor mandate a new tax on American citizens -- especially one levied by an out-of-control federal bureaucracy like the FCC.

This is a serious Constitutional question, relating to separation of powers. Where does it say in the Constitution that a federal agency can levy, raise, or collect taxes? Wasn't there a revolt over taxation without representation?

So if the Gore tax isn't the answer, then what is? Well, I will soon introduce legislation that will abolish this new tax, cut existing taxes, and fund schools and libraries at the same time. Here's how it would work:

• My proposed legislation would slash the current 3% Federal Communications Excise Tax in half, saving American consumers $2.5 billion a year!

• The remaining revenue from the existing tax would fund the provision of telecommunications services to schools and libraries envisioned in Section 254 (h) (B) of the Telecommunications Act of 1996. In other words, $2.5 billion would be dedicated to education in America.

• Under my plan, consumers would not get soaked with additional new taxes, fees, charges or whatever else you want to call them. That will save consumers still another $2.5 billion a year!

• Since the 3% Federal Communications Excise Tax currently goes into the general fund, I propose that we use part of an expected budget surplus as offsets. No other tax cut proposal under serious consideration would impact as many Americans.

BOTTOM LINE: $5 Billion Savings to Consumers...$2.5 Billion for Education!

In politics, that's what you call a win-win!

Currently, the schools and libraries program is in total disarray. In my opinion, an illegal corporation has been set up to administer an illegal tax. My plan would abolish the so-called Schools and Libraries Corporation, along with its $200,000-a-year administrator, and remove the FCC as overseer. A new, legal program would be established by Congress - with appropriate institutional controls on the size and scope of the program -- and administered by the Department of Education in the way of block grants to the states.

By doing this, we can kill two birds with one stone. First, we re-establish Congressional control over the schools and libraries program. Second, we begin phasing out an antiquated tax which disproportionately impacts the poor.

Here's why we need to slash the 3% Federal Communications Excise Tax:

• It was first imposed on telephone service in 1914 when the service was considered a luxury. Today, that case can no longer be made; virtually all households have telephone service. Since it was imposed, the tax has been used to help fund World War 1, World War 11, the Korean War and the Vietnam War. What war are we funding today?

• Since low-income Americans pay a higher percentage of their income for telephone service than middle-and upper-income Americans, the tax is highly regressive.

• The schools and libraries program is currently funded through a new surcharge on bills for telecommunications services. Congress envisioned the passage of the Telecommunications Art would foster competition and lower bills, NOT increase them because of new federal mandates.

• The tax cut is broad-based. Virtually every family and business in the United States will see a real reduction in the total cost of telecommunications services.

• Consumers win a second time. The new surcharge to pay for services to the schools and libraries would not be needed.

• The current schools and libraries program is open-ended, allowing the FCC to increase the rate of the surcharge, or tax, without any congressional action. In effect, the FCC has assumed the responsibility for funding and even expanding a social program.

That's not what I voted for in 1996. If you agree with me, then please consider supporting my legislation to provide a broad-based tax cut for Americans and help to improve education at the same time. Together, let's "Just may YES to families and children!''


House Commerce Subcommittee on
Telecommunications, Trade, and Consumer Protection

Reduction of the Telephone Excise Tax and Providing Funding
for Telecommunications Services to Schools and Libraries





New Rate

For Schools
& Libraries

Savings to

1999 $5,129 3% 50% 1.50% $2,565 $2,565
2000 $5,394 3% 50% 1.50% $2,697 $2,697
2001 $5,691 3% 50% 1.50% $2,846 $2,846
2002 $6,015 3% 50% 1.50% $3,008 $3,008
2003 $6,356 3% 75% 0.75% $1,589 $4,767
Five Year Total: $28,585 $12,704 $15,882

****  Projected savings to taxpayers does not include additional savings from elimination of the existing schools & libraries surcharge collected by certain carriers.