The Knucklehead of the Day Carnival Part Three

Our third winner today is the Internal Revenue Service. They get the award for finally deciding a tax enacted in 1898 is antiquated and shouldn't be collected anymore. Over 13 billion dollars will be refunded to taxpayers when they file their 2006 taxes.

That's our government, it takes 100 years to get something done. For being a bureaucratic turtle, the IRS is our third knucklehead of the day.

Hat tip- Tax Prof Blog by the way of Don Singleton
Open Post- TMH's Bacon Bits,

WASHINGTON (Reuters) - The U.S. Treasury Department on Thursday conceded a legal dispute over the federal excise tax on long-distance telephone service and said the Internal Revenue Service will refund tax paid on the service over the past three years.

In a statement, U.S. Treasury Secretary John Snow also urged Congress to repeal the excise tax on local telephone service.

The Justice Department will no longer pursue litigation on the long-distance issue, the statement said.

The Treasury Department said taxpayers can claim a refund on their 2006 returns for the long-distance tax, which was established in 1898 as a luxury tax on wealthy Americans who owned telephones.

Snow, at a press conference on Capitol Hill with lawmakers, said the tax was "antiquated" and well-rid of.

"It's not often you get to kill a tax, particularly one that goes back so far in history," Snow said, adding that Treasury was pleased to concede this tax was no longer useful.

According to a report in The Wall Street Journal, the decision will lead to billion of dollars in refunds to U.S. consumers and businesses who have paid it, with refunds and lost revenue over the next five years adding up to about $60 billion.

Snow estimated the cost of refunding taxpayers for three years of past taxes would total about $13 billion, and said that there would be no problem in finding that amount.

"The revenue stream is strong and can easily absorb this," Snow said.

In response to questions, Snow said he could not specify how much of the refund might be made to businesses and how much to individuals. He also said Treasury could not yet estimate the size of refund an average individual could expect to get.

Cross Posted to Bullwinkle Blog